Update: Steve Case will online for a live chat to discuss this op-ed at the Washington Post web site Monday, December 12 at 11 a.m.
An extraordinary essay appears in tomorrow’s Washington Post: the former high-profile, and later ousted, leader of AOL Steve Case makes a detailed and reasoned (if not always right) argument for breaking up Time Warner. Sure to give fuel to Carl Icahn’s efforts to do the same thing — although Case says he hasn’t spoken to Icahn at all — the op-ed piece basically argues that because Time Warner and AOL were never integrated into a synergistic whole in the first place, better to scrap the merger and start over again.
Case made the argument for “integrate or liberate” last year, he contends.
By early 2004, it was clear that Time Warner had to “integrate or liberate”: make the divisions work together or set them free on separate paths to pursue their own opportunities. This past July, having concluded that integration would never happen, I proposed to the company’s board that it was time to “liberate” and split the conglomerate into four freestanding companies — Time Warner Cable, Time Warner Entertainment, Time Inc. and AOL — each with its own strategy, stock, balance sheet, management team and board.
This splintering would not only give each division within Time Warner the ability to pursue its own relative strengths, but would give investors the chance to buy shares in their own favored and discrete part of the company. Attracting outside investors such as Microsoft won’t work to help AOL, which Case contends is a victim as much as victimizer in the notoriously derided merger.
Any half-hearted move toward “liberating” AOL is no more likely to succeed than the half-hearted effort toward “integrating” AOL over the past six years. Given that Time Warner failed to capitalize on AOL’s potential during a period when it owned 100 percent of AOL, it seems doubtful that a scenario in which it has a lesser, but still controlling, stake will work better.
(Here Case is engaging in a little bit of revisionist history. He claims Time Warner failed to capitalize on AOL’s potential, but in truth it was AOL that acquired Time Warner. For at least a good year following the merger, the AOL-ites were calling the shots at the merged company and none too smartly either. Part of the reason Time Warner Cable, for example, didn’t race to embrace its new corporate parent and hurry to integrate AOL into its high-speed service was the dismissive attitude emanating from Dulles toward Road Runner and the cable guys.)
Case, currently CEO of another innovative young company, Revolution LLC, thinks if set free, AOL could capitalize on VoIP and the growing trend toward social networking. He likens AOL’s potential rise from the ashes to Apple and its reemergence as a hot tech star.
Could a stand-alone AOL stage a comeback? Five years ago, most people thought Apple was a tarnished brand destined for declining market share and irrelevance. But some (including its co-founder Steve Jobs) saw the potential there, and a spirit of innovation has returned to the company to produce breakthrough products. Apple is now more valuable — and more relevant — than ever. Liberated to pursue its own future, AOL could have an Apple-like renaissance.
Update: Steve Case will online for a live chat to discuss this op-ed at the Washington Post web site Monday, December 12 at 11 a.m.
Cynthia Brumfield at 9:02 AM|Comments(1)
I think Case is right on the mark. The comparrison to Apple is a good one. A faltering brand with good people and strong potential. AOL could emerge as a leader on par with Yahoo. It has the audience base with both AIM and AOL. AOL is strong with families and young kids. These kids will very soon be teens and strong drivers of technology. AIM is already one of the most used technologies for teens and 20's. A few right moves and AOL will be right back in the game
Posted by: Jake Crandall at December 11, 2005 8:32 AM
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