Time to rename this thread?
No More 'AOL' for Time Warner
By David A. Vise
Washington Post Staff Writer
Wednesday, September 17, 2003; Page A01
washingtonpost.com
AOL Time Warner plans to drop "AOL" from its name, symbolizing the giant media company's effort to put the failings of the biggest merger in history behind it and begin a new phase of its corporate identity, company executives said yesterday.
The corporation's board of directors is scheduled to approve the name change at its monthly meeting in New York tomorrow, people close to the board said. Richard D. Parsons, chairman and chief executive, strongly supports the change and intends to move quickly to implement it. The company's logo will be changed and its stock-ticker symbol will revert to "TWX," which Time Warner used before its $112 billion merger with America Online in January 2001.
America Online Inc. was flying high when the Dulles-based firm co-founded by Steve Case bought venerable Time Warner with what turned out to be vastly inflated stock. But Case has been ousted, America Online is a mere division of a media behemoth, and the online unit is struggling to keep subscribers, many of whom have abandoned AOL dial-up service in favor of faster Internet connections provided by cable television and telephone companies.
The decision to drop "AOL" from the corporate name is not a precursor to a sale or spinoff of the America Online division, sources said. It also is not a sign that the company is close to settling an ongoing investigation by the Securities and Exchange Commission into accounting problems at AOL, before and after the merger, that artificially boosted revenue and profit, sources said.
Despite its core business problems, America Online continues to generate more than $1 billion a year in cash, making it of great value to Parsons, who has made corporate debt reduction a top priority. The company, which was nearly $30 billion in debt after the merger and related transactions, has reduced debt to slightly more than $24 billion.
Parsons has said his goal is to slash debt to $20 billion by the end of 2004, but he is on track to reach that figure considerably sooner, sources said, because of a combination of asset sales and strong cash flow.
Yesterday, the company took another step toward improving its financial health by agreeing to sell the money-losing Atlanta Hawks basketball team and Atlanta Thrashers hockey team to an investor group that includes CNN founder Ted Turner's son-in-law, J. Rutherford Seydel II, and several Washington area business executives.
The sports teams and Atlanta's Philips Arena, which is also part of the pending deal, drained an estimated $50 million a year in cash from the corporation. The sale, valued at $250 million including the assumption of debt, does not include the most successful and valuable sports team owned by AOL Time Warner, the Atlanta Braves.
Time Warner partisans have called for a corporate name change for more than 18 months, since America Online's business and accounting troubles dragged down the price of the parent company's stock and depressed the value of their stock-based compensation and retirement accounts. Numerous Time Warner officials, who resented AOL from the start, have made their views about a name change known, both at an open meeting convened by Parsons and in private sessions.
For months, Parsons resisted changing the name, in part because he thought it would be better to resolve the SEC investigation first, and also because he did not want to take action that would be viewed by AOL division employees as punitive, according to sources familiar with Parsons's views. A number of factors led Parsons to change his mind.
First, the SEC investigation dragged on, and Parsons realized that the best thing for AOL Time Warner stockholders would be to get on with business by changing the name and letting the probe run its course, sources said. Also, the America Online brand and the corporate parent's name were confused, as newspapers, magazines and Wall Street took to calling the corporation "AOL."
Senior corporate officials devised a maneuver to bring about the name change in a noncontroversial manner, just as Parsons had made other changes since he rose to the top of the media firm that owns CNN, Time and People magazines, HBO and Time Warner cable, and the Warner Bros. and New Line Cinema movie studios.
Instead of having to order the name change, Parsons received a request for it last month from America Online chief executive Jonathan F. Miller, who stated that the confusion over "AOL" as both the online division's name and an abbreviation for the corporate parent was hurting the brand name.
"Since the merger in early 2001, the three letters AOL have ceased to stand for the Internet and the promise it entails, and instead have become the shorthand for the world's largest media company," Miller wrote in an August memo to America Online employees. "As AOL Time Warner became known as, for all intents and purposes, 'AOL,' any controversy or criticism involving the corporate entity has actually hit our consumer brand."
Miller also gave Parsons a way to deflect internal criticism.
"I recognize fully that it would seem to many that AOL is diminished if our corporate parent reverts to the Time Warner name," Miller wrote. "Some will think that this is a fate being forced upon us. And there is no question this will provide the media yet another opportunity to write negatively about the merger of AOL and Time Warner. But I want to emphasize that I initiated the dialogue with Dick Parsons about the name change -- no one asked me to do this -- because it would be the right thing for our business."
Parsons, who had said he would change the name only if there was a business reason to do so, finally had one. The company could once again tout its Time Warner brands instead of having its endeavors identified by the abbreviation for its online unit, such as when New York Mayor Michael R. Bloomberg spoke recently of "AOL" sponsoring a Central Park concert, for which the corporate parent is paying.
While a name change may be in order above the entrance to AOL Time Warner's current corporate home at 75 Rockefeller Plaza, no costly signs will have to be removed from the company's new headquarters, under construction at One Columbus Circle in Manhattan. That property, scheduled to be complete early next year, doesn't yet have a permanent sign. |
