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Technology Stocks : America On-Line (AOL) -- Ignore unavailable to you. Want to Upgrade?

To: JakeStraw who wrote (41112)	5/15/2002 9:05:34 PM
From: sandintoes	Read Replies (2) \| Respond to of 41369

Thought you might be interested in this.... [ The Atlanta Journal-Constitution: 5/15/02 ] Employees left holding languid stock options By DAVID MCNAUGHTON Atlanta Journal-Constitution Staff Writer Ted Rubenstein gets off this line when asked about AOL Time Warner stock: "I can't hear you. I'm underwater." Actually, it's the options he and other company employees have that are underwater. That means the stock is trading below the exercise price of the options, which makes them worthless. For now. "To say I am disappointed with the performance of the stock would be the understatement of the decade," said Rubenstein, a senior producer at CNN Productions. See, Ted Turner isn't the only Ted with a gripe about AOL Time Warner stock, just the one with the most at stake. AOL Time Warner shares closed at $46.47 on Jan. 12, 2001, the day after the merger of Time Warner and America Online was completed. On Tuesday, the stock closed at $18.55. That's a 60 percent drop. Current and former employees hold shares of the company in 401(k) plans, in individual retirement accounts and in regular brokerage accounts. But even if they had never bought any stock in AOL Time Warner or the predecessor companies, they still would have an interest in what happens to the stock. That's because most of AOL Time Warner's 89,300 employees received stock options in 2001 and again this year. The goal, spelled out in AOL Time Warner's proxy statement, was to create "a sense of common purpose throughout the newly formed company by giving employees a stake in the company's success." Last year, the options -- with 10-year lives -- were granted with an exercise price of $48.96. This year, they were in the high $20s, according to AOL Time Warner employees. Rubenstein said the stock's performance has affected him "only marginally, because I'm pretty conservative with my money." No loading up on AOL Time Warner stock in his 401(k), for example. David Bernknopf was around only for the 2001 round of options under AOL Time Warner, but he had been accumulating options for years before that from Time Warner and Turner Broadcasting System. "I had thousands of options at various prices," said the former vice president of news planning at CNN. It was difficult not to think about things like early retirement or "buying a big boat," Bernknopf said. "It was easy to think for many years that stock options can only increase in value," he said. Now, "many of my options are so worthless as to be hopeless. It wasn't a wasted lesson, but it was painful." Bernknopf thought about selling AOL Time Warner shares in his 401(k) and in a brokerage account, but he could not pull the trigger. "The rapid, dramatic decline sort of paralyzed my decision-making," he said. "You keep thinking it will come back." Selling is one way for AOL Time Warner shareholders to diversify their holdings, said money manager Phillip M. Larkins of Legacy South in Atlanta. But he thinks "there's good value" in the shares. "The stock is basically priced for the underlying value of Time Warner, and you pick up AOL for nothing," Larkins said. And he said there's not much downside risk to the stock. But he said AOL Time Warner shareholders will have to be patient. "Anything that has to do with technology or the Internet is being punished harshly by the market," Larkins said. "Unless you see some improvement in AOL, the stock may languish." Rubenstein might view that as an opportunity. As unhappy as he is with the stock, Rubenstein has not sold -- and in fact has not ruled out buying more.