The world’s biggest media conglomerate, AOL Time Warner Inc., was humbled Wednesday by two stinging losses -- one financial, one largely symbolic. In separate announcements, the company reported that it lost $98.7 billion last year, the most in U.S. corporate history, and that its highest-profile executive, media titan Ted Turner, has announced his plan to resign as vice chairman.
Most Wall Street analysts expected the company to post a substantial loss, although not anywhere near the amount AOL Time Warner announced.
But what caught everyone by surprise was the departure of Turner, the pioneering executive who watched the cable empire he built get swept up in an ill-fated merger that devastated his personal fortune.
“I have not come to this decision lightly,” Turner said in a statement released by AOL Time Warner.
But Turner, the company’s largest individual shareholder, said he had confidence in a new management team recently put in place. “I am optimistic,” he said, “that the company will be able to move forward and reach its true potential.”
Turner will step down as vice chairman at the company’s annual shareholders meeting in May, at the same time that Chairman Steve Case will depart. AOL Time Warner executives said Wednesday that Chief Executive Richard Parsons expected Turner to remain on the company’s board but that Turner has not made up his mind. One of the most influential and colorful media figures of the 20th century, Turner said he plans to devote more time to his philanthropic interests and several “socially responsible business efforts.”
Some close to Turner were caught off guard by his resignation, particularly after he helped lead the charge to oust the two architects of the merger, Time Warner’s Gerald Levin and Case, America Online’s founder.
Friends described Turner’s resignation as the culmination of a series of disappointments. Turner never recovered, they said, from being stripped of his operating role in the wake of the merger. Increasingly, they said, he felt like an outsider in the company he had helped build. He believed his opinions were not valued or heeded, even with regard to the properties that he founded, such as CNN, which revolutionized TV news with the first 24-hour news channel.
Turner was overruled, for example, when he lobbied for 22-year CNN veteran Eason Jordan to replace outgoing chief Walter Isaacson, who resigned this month.
Perhaps more significantly, Turner was said to be hurt when he was not asked to serve as the company’s chairman after Case announced his resignation. Parsons will assume the additional post of chairman after Case leaves.
“It was just an accumulation of things, over many years,” said one source close to the media mogul.
Turner founded Turner Broadcasting System, parent of CNN, TBS, TNT and the Atlanta Braves. He sold his cable empire to Time Warner in 1995, giving the company a presence in the fastest-growing segment of the entertainment business -- cable programming. The deal lifted Time Warner’s sagging stock price. It also helped save Levin, who was under pressure by Wall Street to make the company’s heavy investments in cable systems pay off.
As Time Warner’s largest individual shareholder, Turner threw his support behind Levin, agreeing to vote his shares in favor of the 2001 merger of Internet service provider America Online and media giant Time Warner.
But Turner quickly had seller’s remorse.
Turner felt double-crossed when Levin, chief executive of the new company, demoted him. Turner lost his oversight of the cable group and was relegated to a figurehead role as vice chairman.
He was poised to leave the company when his contract expired at the end of 2001. But he decided to stay after Levin was forced out and replaced by Parsons, who restored some of Turner’s power.
Since the merger, Turner’s personal fortune has plunged as the company’s stock price fell 78%. His stake is now worth about $1.9 billion, down from $7.2 billion two years ago. The decline has made it difficult for Turner to fulfill his 1997 pledge to donate $1 billion over 10 years to the United Nations.
It’s unclear whether Turner’s resignation from the company would lead him to sell his stock. Turner owns about 132.5 million shares, or 3.1% of the common shares outstanding.
“I know Ted has been upset with the AOL Time Warner merger,” said Tom Johnson, a former chief executive at CNN and close friend of Turner. “His stock plummeted, diminishing his [charitable] foundation’s value and his plans in the field of philanthropy.”
Some within the company suggested that Turner may be trying to free himself of the burden of AOL -- and perhaps the guilt of going along with the merger -- now that he has succeeded in driving out Levin and Case. They say he recently relocated his residence to Tallahassee, Fla., where his family usually celebrates Christmas, from Atlanta, the home of CNN and Turner Broadcasting.
Friends said Turner, who is divorced from actress Jane Fonda, plans to focus on expanding his chain of restaurants, which specialize in buffalo burgers.
One of the biggest landowners in the United States, Turner spends most of his time on his ranches in Montana and in Argentina, where he also owns vast acreage.
“This is a real surprise,” said Jessica Reif Cohen, an analyst at Merrill Lynch & Co. who follows the company, said of Turner’s resignation. “He was a great cheerleader for the company and a real independent voice. You could count on him to question management.”
Some within the company speculate that he will become even more vocal once he relinquishes his management role.
“If you want to be a burr in the side of management, you cannot be part of management,” said Patrick McGurn, director of Institutional Shareholders Services, which advises investors and companies on corporate governance.
(BEGIN TEXT OF INFOBOX)
A media titan
Ted Turner’s colorful and pioneering career made him one of the most influential media figures of the 20th century:
1960-63: Sells space on billboards for his father’s company, Turner Advertising.
1963: Takes over the company at age 24 after his father’s suicide.
1970: Enters broadcasting with purchase of an independent UHF TV station (later WTBS) in Atlanta.
1976: Buys Atlanta Braves baseball team.
1976: Revolutionizes cable television when he begins the nationwide transmission of WTBS to cable systems hungry for new programming.
1977: Purchases Atlanta Hawks basketball team.
1980: Establishes CNN, the first 24-hour, all-news station.
1982: Launches Headline News, a second 24-hour TV station.
1985: Creates the Goodwill Games (holds first games in Moscow in 1986).
1985: Attempts takeover of CBS for $5.4 billion, but is blocked by the network.
1985: Buys MGM/UA Entertainment Co. for $1.5 billion.
1988: Starts TNT (Turner Network Television).
1993: Turner Broadcasting System buys New Line Cinema and Castle Rock Entertainment for $650 million.
1994: Introduces the cable channel Turner Classic Movies.
1995: Agrees to merger of Turner Entertainment and Time Warner.
1996: Becomes vice chairman of Time Warner.
1996: Sparks controversy by saying that doing business with rival Rupert Murdoch was like trying to confront the “late Fuhrer.”
1997: Announces $1-billion charitable gift to the United Nations.
1997: Receives $5-million bonus from Time Warner.
1987-2000: Buys 1.7 million acres in Montana, New Mexico, South Dakota, Nebraska and Kansas, becoming the largest private landowner in the United States.
2000: Relieved of duties at Turner Broadcasting after the merger of AOL and Time Warner.
Jan. 29, 2003: Announces that he will step down as vice chairman of AOL Time Warner.
Compiled by Scott J. Wilson
- Los Angeles Times