Facing an audience full of frustrated stockholders, new AOL Time Warner Inc. (AOLTW) Chief Executive Officer Richard Parsons stood on the stage of the Apollo Theater in Harlem Thursday, pledging to revitalize the company’s America Online Inc. Internet division and restoring investor confidence.
Parsons’ appearance in the famed New York amateur theater for AOLTW’s annual stockholders’ meeting marked his first day on the job as CEO, replacing Gerald Levin, who retired after 10 years in the post. But overshadowing the changing of the guard was shareholders’ demand for an explanation of why the company’s stock price declined more than 60 percent in the last year.
AOLTW Chairman Steve Case first addressed stockholders’ concerns.
“The fact of the matter is that our AOL business and our vision of the new combined company got off track. As we stand here today we realize that we have to work to regain your confidence,” Case said.
“We have made some mistakes in the last year for sure. The financial expectations were set too high and we stuck with them too long, diminishing our credibility,” he continued.
The official merging of AOL and Time Warner Inc. in January 2001 prompted company executives to set particularly high goals for the new entity, as it promised to leverage its diverse media assets, including TV, Internet, radio, film, music and magazines, against one another. Many analysts and stockholders have complained that these promises have remained largely unfulfilled.
As part of Parsons’ top priorities as CEO, he promised to directly address the failings of the company, specifically to boost the performance of AOL and rope in exalted expectations, although he did not reveal any specific plans.
“None of us on the board and in management are happy with the stock price,” Parsons said. “We are disappointed, to be honest.”
The new CEO pinned the precipitous drop in share value on the flailing global economy and resulting weak advertising market.
“In the past 18 months almost everything has changed. The AOL business has undergone a dramatic reevaluation, which led to stock collapse,” Parsons said.
But while AOL has faced a weak online advertising market, a slowdown in subscription rates and an even more sluggish adoption of broadband, Parsons expressed confidence that the Internet division could be revitalized.
Already, the division has undergone heavy executive reshuffling, including the appointment of two new top posts Wednesday, a vice president of operations in AOL Interactive Services and an AOL executive vice president of product marketing. AOL also has a new head honcho, AOLTW Co-Chief Operating Officer Bob Pittman, who just took over the duties from former AOL CEO Barry Schuler last month when Schuler left to head a new digital division of the company.
With new leadership not only at AOL, but also at the helm of its parent company, investors and industry watchers are holding their breath to see how the media mammoth performs over the next year.
With Case and Parsons’ explicit recognition of the company’s past failings, they indicated that the company is moving in a much more transparent direction. In fact, Parsons made transparency, and specifically financial transparency, another top priority for his tenure. Addressing the implosion of energy trading company Enron Corp., whose financial shenanigans eventually caused its spectacular collapse, Parsons said that AOLTW would strive for the highest accounting standards possible.
“We understand that companies that meet this higher standard will be rewarded,” he added.
Other than offering an opportunity for the company to try to restore investor confidence, this year the annual meeting in New York also served as a final farewell to Levin.
In an emotional speech, Levin encouraged shareholders to have faith in the business he worked years to develop.
“I know the frustration you feel now is real, and it is aggravated for all of us in the world after Sept. 11, a world of war, terrorism, tragedy, financial turmoil, and religious scandal. But don’t let your frustration turn into cynicism or despair. In a word, have faith in this company,” Levin said.