Last Man Standing-- AOL’s Case Still a Target

Steve Case finally has something to do at AOL Time Warner: fight for his job.

Case, often criticized as missing in action during the company’s continuing woes, survived a lobbying campaign for his ouster last week by some directors and institutional investors who are dissatisfied with his performance. But his future as chairman remains in question.

The boyish former Pizza Hut manager, who built the world’s largest Internet company, must prove he can provide value to the world’s biggest media giant that he helped create--but at a time many inside the company don’t want his help.

On Wall Street, Case’s credentials as a salesman have been tarnished by the company’s stock slump and a government investigation of questionable advertising deals, which were made while Case was in charge of America Online.

Critics are questioning his skills as a long-term visionary, and AOL Time Warner Chief Executive Richard Parsons is unwinding some of the cross-company synergies once advocated by Case.

Even the Internet unit in Dulles, Va., where Case, 44, made his name and keeps his primary office, is under the stewardship of young new leaders who don’t need the old boss pitching his ideas.

Which raises the question: What’s left for Case to do?

Case and other AOL Time Warner executives declined to comment for this report.

But privately, sources said the question of Case’s future has set off a war of words inside the company.

It was Case who, at the peak of the dot-com craze, used America Online’s fast-rising stock to purchase one of the world’s most respected media companies, Time Warner. Since the merger in January 2001, however, AOL Time Warner’s shares have lost about three-fourths of their value, closing Friday at $12.53 on the New York Stock Exchange. And the ballyhooed synergies of AOL’s Internet business and Time Warner’s movie, record, publishing and cable empire have never clicked. In the spring, then-CEO Gerald Levin resigned under pressure. And in July, Robert W. Pittman, former chief executive of America Online and then co-chief operating officer of the combined company, also resigned.

As the last top executive from the Internet side of the company, Case is resented by those who say America Online behaved arrogantly after the merger and then failed to tend its business. They question what Case has been doing for the last year and say his presence causes more harm than good.

“Time Warner people feel completely ripped off and sold down the river and condescended to” by AOL executives, including Case, said a Warner Bros. executive.

Case’s defenders quickly note that it was never his job as chairman to oversee day-to-day operations. In fact, they say, Time Warner executives insisted that he stay behind the scenes to avoid confusion about who was running the company.

“That was the deal,” said one senior official at America Online. “It’s ironic that they complain about it now. Are they inviting him back in?”

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Reconceptualizing

Case supporters also dismiss the notion that he has no role in helping to turn around the Internet unit, noting that he helped hire Jonathan Miller, the new America Online chief, and has been welcomed back to help reconceptualize the online service as it tries to switch more customers from dial-up to faster broadband Internet service. In the hallways of the Dulles headquarters, some employees have hung signs reading, “We support you Steve” and “We love you Steve.”

Case helped to close a big partnership deal with Sony Corp. to deliver next-generation online entertainment on broadband home networks. And he was key in recruiting Robert M. Kimmitt, former U.S. ambassador to Germany, to lead AOL Time Warner’s lobbying office in Washington.

But for most of 2001 he was out of sight, spending much of his time with his brother, investment banker Dan Case, who was ill and died of brain cancer in June.

Analysts say removing Case would do little to help the parent company recover.

“I don’t really see how it would change what they’re up against,” said Nicholas Truitt, a money manager with Strong Asset Management, which owns about 3 million AOL Time Warner shares. “Anyone who gave away more than half the value of their Time Warner shares is justifiably upset, but [ousting Case] doesn’t solve the problem.”

About nine months ago, Case began to be pressed to take a more active role in the media company, particularly as Levin prepared to exit.

Case earlier this year gave an inspirational speech to the troops in the Atlanta offices, where Turner Broadcasting Systems operates cable channels such as CNN, TBS and Cartoon Network. “He scored big,” said one executive, who said staffers were relieved to hear Case’s call for more long-term thinking after they had endured cost-cutting that had crippled morale. But divisional executives say there have been no memos, e-mails or speeches from Case since then.

He spends little time at the parent firm’s New York headquarters, although some company leaders had nudged Case to spend more time there as Levin was leaving. They hoped a higher profile would remind Wall Street that AOL Time Warner still was an “Internet-charged” company.

Few now want to remind Wall Street of that.

In fact, a much debated topic within the company recently is whether to drop AOL from the parent company’s name. Some say dropping AOL would tarnish the brand, but others worry that the name is a constant reminder to investors about how they were burned. But many agree that as long as Case is chairman, the AOL name will stay.

And at the moment his job looks secure. AOL Time Warner bylaws require a three-fourths vote of the board, or at least 11 of the 14 members, to remove Case. Although board members Stephen F. Bollenbach, CEO of Hilton Hotels Corp., and Francis T. “Fay” Vincent Jr., former major league baseball commissioner, are among those leading the campaign against Case, sources said, Parsons and others have expressed support.

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What Role for Case?

Case’s future may depend upon how hard he is willing to fight. He’s never appeared to enjoy the day-to-day management tasks of corporate leadership and has not shown signs of missing a more active role, those close to him say.

Although he fell off the Forbes 400 list of wealthy Americans this year (with his fortune dropping from $1.5 billion in 2000 to less than $550 million this year), Case still has plenty of money to retire comfortably. Last year, he bought a 22,000-acre ranch in Hawaii.

But those close to Case say he wants to stay. He has survived previous corporate battles--including attempted takeovers of America Online by Microsoft Corp. and AT&T; Corp.--and steered the company’s growth despite some predictions of its demise.

In the 1990s, Case often was ridiculed by techies for pushing a “dumbed down” version of the Internet, which was plagued with connection problems that frustrated users.

But Case stuck to his consumer-friendly online service and ended up squashing nearly every other Internet service provider. AOL was quick to realize the potential of instant-messaging and the company still dominates that popular service.

Case is no quitter, supporters say. In fact, he tends to thrive in adversity. “He’s a survivor,” said Julia Wilkinson, a former AOL manager and author of “My Life at AOL.” “He’s always tried to accept criticism, see what’s true and try to do better.”

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(BEGIN TEXT OF INFOBOX)

Bio: Steve Case

Vitals: Born Aug. 21, 1958, in Honolulu. As a boy he founded a door-to-door business selling greeting cards and seeds with his brother

1980: Received BA in political science at Williams College.

1980-1982: Worked in Procter & Gamble’s marketing department.

1982-1983: Manager of new pizza development for Pizza Hut.

1983-85: Marketing executive at Control Video.

1985: Helps Control Video reform itself into Quantum Computer Services.

1989: Changes name of Quantum to America Online.

1990: Named president of America Online.

1991: Named chief executive, then temporarily stripped of the title by AOL before the IPO.

1993: Permanently named CEO.

1995: Named company chairman.

2001: AOL and Time Warner complete merger, and Case becomes company chairman.

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Sanders reported from Washington, Hofmeister from Los Angeles. Times staff writer Thomas S. Mulligan in New York contributed to this report.