STEALING
TIME
Book Author - Alec Klein
Book Review by - S S George
Dean, ICMR Case Studies and Management Resources
<<Previous
Gerald Manuel Levin, the CEO of Time Warner, was an “unprepossessing figure
stalking the hallways of the great empire”. He had ascended to the position of
CEO by staging a coup against his boss and benefactor Nick Nicholas, while
Nicholas was on a skiing vacation with his family. Levin was generally disliked
by the countless people he had fired, passed over, or ignored in his climb to
power. If the silent, stolid, Steve Case was called “The Wall”, Levin was
called Caligula.
|
Though a master of the deft political maneuver,
Levin’s business acumen was also being questioned by investors. Levin was
under pressure to find a way to ensure that Time Warner did not end up as
road kill on the information superhighway. Case and Levin, with their
distinctly different personalities, made for an unlikely partnership.
However, negotiations began between the two companies for a possible
merger. After a series of hiccups where the point of disagreement was the
price, the merger between AOL and Time Warner was announced in January
2000.Perhaps ironically, in the light of later developments, the proposed
merger met with opposition from a wide range of individuals and companies,
most of whom were worried about the monopoly powers that could be
exercised by the merged entity This led to the proposal being examined by
the Federal Trade Commission as well as the Federal Communications
Commission, and the merger being delayed by several months. |
|
Problems with the regulatory
authorities were exacerbated by the behavior of Case and Levin, who apparently
managed to alienate most of the influential people on the two Commissions with
their arrogance. However, all the roadblocks were eventually removed, and the
merger finally took place on January 11, 2001, a year after it was announced.
Case became the Chairman of the merged entity, while Levin was the CEO.
During the period between the decision to merge and the actual merger, the
Internet balloon was deflating. Most technology companies saw their share
prices drop precipitously. Many of the advertisers, the dotcoms which had been
put through the wringer by AOL’s business development unit, began to go
bankrupt, and advertising revenues dried up. All through this, the company
maintained a façade of optimism, reassuring the world that all was well, and
that revenues would continue to go up.
Behind the façade, though, things were not going well. The company had to
resort to increasingly dubious accounting-sleight-of-hand to meet quarterly
forecasts. These would eventually prove to be a millstone around Time Warner’s
neck for years to come. The much touted synergies from the merger never
materialized. Turf remained sacrosanct. The fiefdoms of Time Warner, which even
earlier had problems working together, closed ranks against the upstarts from
AOL, and the AOL employees had only contempt for the suits from Time Warner.
But, as the Internet hype died down, AOL’s relevance and importance within the
new structure came increasingly under question.
If Levin had had few friends before the merger, he had even fewer once the
merger was completed and the real folly of his action became apparent. After
being sidelined by Case, and under pressure from the board, Levin announced his
retirement in December 2001. However, before leaving, he fired one last shot.
He had Richard Parsons, a Time Warner veteran, appointed CEO in his place,
instead of someone from the AOL side. The end of the story is actually given at
the beginning of the book. At a meeting of company executives in the spring of
2002, Steve Case, as Chairman of AOL Time Warner, was expounding on the rosy
future of the company. He was brought to an abrupt halt by Jeff Bewkes, the
Chairman and Chief Executive of HBO, one of the divisions of the company. “I’m
tired of this,” Bewkes said. “This is bull---. The only division that’s not
performing is yours. Every one of us is growing, making the numbers. The only
problem in this construct is AOL.” That incident, more than any other, marked
the end of the pretense that AOL was anything more than a division of AOL Time
Warner.
In January 2003, Case announced that he would step down as Chairman effective
from May of the same year. At that time, the company’s shares had lost 80
percent of their value from the day the merger was announced. Even today, Time
Warner appears to be paying the price for the ill-judged merger. The company is
facing the threat of lawsuits from investors, in addition to probes by
regulatory agencies for accounting irregularities. Much as it may like to put
the merger behind it, the debacle is likely to haunt Time Warner for many years
to come.
2004, ICMR Case Studies and Management Resources . All rights reserved. No part of this publication may be
reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted
in any form or by any means - electronic or mechanical, without permission.
To order copies, call 0091-40-2343-0462/63/64 or write to ICMR Case Studies and Management Resources , Plot # 49, Nagarjuna Hills, Hyderabad 500 082, India or
email info@icmrindia.org. Website: www.icmrindia.org
This case study is intended to be used as a basis for class discussion rather
than to illustrate either effective or ineffective handling of a management
situation. This case was compiled from published sources.
|
More Classifications...