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Thursday, 16 May, 2002, 04:34 GMT 05:34 UK
AOL's new chief faces mammoth challenge
Graph of Aol Time Warner share price
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by Briony Hale
BBC News Online business reporter
line
A new man will pick up the reins of the world's largest media company on Thursday. The challenge facing AOL Time Warner's Richard Parsons is enormous.
Richard Parsons has already listed his first goal as AOL Time Warner's new chief executive: "restore our credibility with investors".

That's a pretty tough call considering the string of broken promises and escalating losses that shareholders have had to absorb lately.


We believe the key is to instil a more sober and disciplined mentality

Paul Kim
Kaufman Brothers
AOL Time Warner is a sprawling media giant, with interests ranging from cable channels like CNN to Time magazine and film studios making box office hits like Lord of the Rings.

In the first three months of this year, it racked up one of the highest quarterly losses in history, making a record $54bn (37bn) write-down.

The write-down is basically an admission that the firm's assets are worth far less today than was claimed yesterday.

Shrinking savings

Meanwhile, the synergies promised at the time of the mega-merger between AOL and Time Warner have failed to materialise.

When media group Time Warner agreed to merge with internet leader AOL more than two years ago, the combined firms were worth $290bn.

Richard Parsons
Mr Parsons is seen as a safe pair of hands
And many analysts saw it as a marriage made in heaven, with the biggest internet service provider set to empower the established giant of traditional information and entertainment.

Since then, more than $200bn of investors' money has evaporated.

Now the 54 year old Mr Parsons, one of the most prominent African-American businessman, shoulders the responsibility of winning back the trust of his investors.

The dot.com blip

Analysts are already enthusiastic, touting him as a "safe pair of hands" and the man to set more realistic goals than his predecessor, Jerry Levin.

The 63 year old Mr Levin, an ardent enthusiast of all things internet, leaves the firm still singing the praises of the merger he created at the height of the dot.com boom.

Jerry Levin
Mr Levin is still singing the praises of the merger he forged
"Although it's the current fashion for some to diminish the significance of the Internet, digital media will continue to utterly reconfigure the entire communications industry," he said last month.

And he optimistically claimed that the spectacular crash of the dot-com bubble could look like nothing more than a blip in the long-term.

Safe and sober

Mr Parsons has more of a blue-chip background, arriving at Time Warner by way of government service and banking, after training as a lawyer.

"With the lofty promises of the merger now a distant memory and now a remote possibility, we believe the key is to instil a more sober and disciplined mentality and focus on core competencies," said Kaufman Brothers' Paul Kim in a recent research note.

It is this new sober and disciplined tone that investors and analysts expect to hear reflected as the new boss addresses the annual general meeting on Thursday.

He will have to outline a strategy to tackle the anaemic advertising markets and the slowdown in the firm's AOL online unit, the unit which has previously been one of the more profitable parts of the overall business.

"The African-American journey is a saga of faith, persistence and hard work," Mr Parsons said earlier this year, speaking at a celebration of Black history.

His new job seems likely to require similar endurance.

See also:

11 Jan 02 | Business
AOL merger yet to convince
25 Apr 02 | Business
Q&A: AOL Time Warner's losses
24 Apr 02 | Business
AOL unveils $54bn loss
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