America Online Expected to Name USAI Executive as CEO

AOL Time Warner Inc. is expected to name a new head of its struggling America Online division as early as today, turning to an outsider to stabilize and reinvigorate its most troubled unit, sources said.

Jon Miller, formerly president of the information and services group of USA Interactive Inc., will be appointed chairman and chief executive of the division, which has been without a leader since the abrupt resignation last month of Robert W. Pittman amid a plummeting stock price.

America Online’s credibility battle on Wall Street and within the AOL Time Warner family means Miller will be stepping into one of the most challenging and high-profile jobs in media. But people who know the 45-year-old executive say his understated, collaborative style and experience across both the entertainment and Internet sectors will reshape the insular AOL.

Analysts also pointed out that Miller’s style will mesh well with the parent company’s new management team, drawn entirely from Time Warner ranks.Chief Executive Richard D. Parsons is known for a soothing, low-key style, a stark contrast to AOL’s brash, take-no-prisoners approach. That attitude, symbolized by Pittman, alienated many old-line Time Warner executives who were relieved last month when he stepped down as chief operating officer of the company and president of the Internet division.

The two top lieutenants Parsons appointed last month--former HBO Chief Executive Jeffrey Bewkes and former Time Inc. Chairman Don Logan--also are described as under-the-radar executives who duck the limelight.

Miller also is coolheaded.

“He’s not a yeller, screamer, jumper or thrower,” said Bill Simon, managing director of the global media and entertainment practice of headhunter Korn Ferry International, who recruited talent for Miller when he was at USA Interactive. “The experience at USAI is a tremendous springboard for him to go to AOL,” Simon said. “He’ll be outstanding, sensitive to the cultural issues within AOL Time Warner and in using AOL’s customer base to benefit other Time Warner brands. It’s a lot of heavy lifting, but he’s good at building teams around him.”

At the moment, America Online is the worst-performing division within AOL Time Warner. A steep decline in its advertising revenue and customer base since its 2001 merger with Time Warner has pushed shares of the world’s largest media enterprise to record lows.

Instead of driving 20% annual growth of the new company, as promised in the merger, the division, with its eroding economics, has created a credibility gap internally and on Wall Street. In addition, a federal probe of AOL Time Warner’s accounting practices is expected to zero in on the Internet division.

AOL Time Warner stock closed at $9.95 on Monday on the New York Stock Exchange, down from $74 just months after the merger was announced.

Executives who know Miller say he will do some housecleaning at AOL, bringing in his own top team and driving out a culture focused increasingly on advertising revenue and bottom-line performance rather than the customer. They say he also will concentrate on new services to keep customers from leaving.

Miller is one of the few Internet success stories, having helped media mogul Barry Diller build USA Interactive, through several acquisitions, into one of the biggest revenue generators left standing after the dot-com meltdown.

USA Interactive, which sells concert and airline tickets and hotel reservations online, will have an estimated $700 million in operating cash flow this year from $4.8 billion in revenue, according to Bear, Stearns & Co. Those sales represent about 9% of all online consumer transactions, putting USA Interactive just behind EBay.

“They’ve come a long way since 1997,” when Miller joined the company, said Victor Miller (no relation), an analyst at Bear Stearns who closely followed Jon Miller at USA Interactive.

Yet USA Interactive is just a fraction of the size of America Online, which has about $1.7 billion in cash flow.

Some investors say the job may be a giant step for Miller but acknowledge that there is a limited pool of successful Internet executives to draw upon.

In addition to restoring confidence on Wall Street and retooling AOL’s economic model, Miller faces a cultural divide within AOL Time Warner.

Many Time Warner executives blame the division and its management for wiping out their nest eggs and stock options as shares declined.

Executives who know Miller say he will help bridge the divide.

Before joining Diller in 1997, Miller was managing director of Viacom Inc.’s Nickelodeon International and chief programming executive for the National Basketball Assn. Diller hired him to head his company’s broadcast group, a two-bit station operation bought for $250 million and sold a couple years later to Univision for more than $1 billion. Diller then put Miller in charge of the interactive group.

Simon, the headhunter, said Miller’s stint under Diller--one of the toughest bosses in media--would be useful at AOL. “He doesn’t allow the noise around him become a distraction,” Simon said.