AOL Time Warner Seeks CEO for Its Internet Unit

Taking another step toward trying to reestablish credibility with investors, AOL Time Warner Inc. confirmed Friday that it has hired an executive search firm to find someone to run its ailing America Online Internet division.

The action comes amid growing speculation that the unit’s temporary head, AOL Time Warner Chief Operating Officer Robert W. Pittman, may leave the company in a few weeks.

Pittman has been especially criticized for inflating Wall Street’s financial expectations of the merger of America Online and media giant Time Warner Inc. and for irritating executives in other units.

To date, the deal has been a debacle for investors, with the combined company’s market value plunging more than $100 billion since it closed in January 2001. Earlier this year, AOL Time Warner posted a record $54-billion quarterly loss.

Former Chief Executive Gerald M. Levin left under fire, replaced by Richard D. Parsons, who has been visiting company units seeking to ease concerns of employees. Earlier this week, Parsons visited the Warner Bros. studio in Burbank.

AOL Time Warner hired search firm Spencer Stuart to identify candidates to run AOL, spokeswoman Tricia Primrose said. The search is being overseen by AOL Time Warner executive Patricia Fili-Krushel, former president of ABC Television Network as well as a former Internet executive at WebMD.

According to sources, the company wants a broad list of candidates to supplement a list of internal ones led by Don Logan, who heads the company’s Time Inc. unit. Logan, 58, was hired in 1992 as president of the magazine operation after building Southern Living magazine into a success.

Pittman has been temporarily running AOL, spending two days a week at its Dulles, Va., headquarters. Pittman stepped into the job after the unit’s former chief executive, Barry Schuler, was bumped aside in April amid sagging ad sales and diminished expectations of the Internet company’s ability to leverage former Time Warner entertainment assets into profitable ventures.

Early in the merger, Pittman ruffled feathers by trying to force synergies on skeptical Time Warner executives. But Pittman still has fans within the company, principally at the AOL unit and among certain high-level executives such as Turner Broadcasting System President Jamie Kellner. People close to AOL Time Warner Chairman Steve Case say Case is supportive of Pittman and believes he is essential to the top management team, but that Case recognizes that Pittman is unpopular.

At AOL’s headquarters, some said the current speculation about Pittman may be nothing more than wishful thinking or finger-pointing by executives in other AOL Time Warner divisions, underscoring the worsening relations between former Time Warner factions in New York and AOL executives in Dulles.

Executives in the entertainment units blame the Internet division for dragging down the company’s stock price, which has made worthless many of the stock options executives were hoping would make them wealthy.

Some inside the company were skeptical that Pittman would leave, but others said Parsons has been focusing less on developing synergy between various divisions, which had been Pittman’s primary role.

Instead, Parsons now wants each stand-alone unit to focus on being the best in its sector, leaving less work for Pittman.

Division heads also may prefer to see the COO post eliminated because it would give them more direct access to Parsons, rather than reporting through Pittman.

Primrose said the search should be no surprise, as it has been clear from the outset that Pittman’s reassignment was temporary and that he would return to his post as chief operating officer of the parent company. She said she was unaware of any change in that plan.

“He has been and is COO, so that has not changed,” Primrose said.

Times staff writers Sallie Hofmeister, Edmund Sanders and Thomas S. Mulligan contributed to this report.