America Online CEO Shuffles Executives
A month after taking over as chairman and chief executive of AOL Time Warner’s troubled America Online subsidiary, Jonathan Miller seized the reins more firmly Thursday, shuffling executives and unveiling a “streamlined management structure” with all key departments reporting directly to him.
The move eliminates the positions of president and chief operating officer and, more significant, disbands AOL’s business affairs department, the nearly autonomous unit that put together advertising deals that are now the subject of a federal accounting probe. David Colburn, the head of that unit and the architect of many of the ad deals, left the company last month.
“We wanted to flatten the organization and build it for speed,” Miller said in an interview Thursday.
Analysts said the restructuring might accomplish its stated goals of increasing accountability and operating efficiency but did not address America Online’s fundamental problems with plunging Internet advertising and slowing subscriber growth for its popular dial-up service.
“They really did not outline any evidence of how they are going to reinvigorate the business,” said Frederick W. Moran, an analyst with Jefferies & Co.
Under the management overhaul, AOL President Ray Oglethorpe, 58, will retire, and Chief Operating Officer J. Michael Kelly will become chairman and chief executive of AOL International.
Both are AOL veterans brought aboard by Chairman Steve Case and then-Chief Executive Robert W. Pittman well before the 2001 merger with Time Warner. Another AOL veteran, Jan Brandt, will resign as vice chairwoman and chief marketing officer and become a part-time senior advisor.
Elevated to become America Online’s vice chairman is Joseph Ripp, currently executive vice president and chief financial officer. The company said it was launching a search for a new CFO.
On Monday, AOL Time Warner cut its estimates for online ad sales and profit at America Online for the second time in two months. It was a setback for AOL Time Warner Chief Executive Richard D. Parsons, who assumed the top job in May vowing not to over-promise results.
Even Monday’s revision may not be enough, said Moran, the Jefferies analyst. He said plunging cash flow at the AOL unit is almost certain to keep the parent company from hitting its key full-year target of 5% growth in EBITDA, or earnings before interest, taxes, depreciation and amortization.
The Justice Department and the Securities and Exchange Commission are investigating AOL Time Warner’s accounting. The probes are thought to focus on whether the America Online unit improperly boosted revenue through unconventional advertising transactions.
AOL Time Warner disclosed last month that its own investigation had turned up three transactions by America Online involving $49 million that may have been improperly booked as advertising and commerce revenue.
Shares of AOL Time Warner fell 75 cents to $12.50 on the New York Stock Exchange.