Memo from Dick Parsons: To hell with transformation.

Well attuned to the market's current distaste for deals that shift paradigms and shatter the earth, AOL Time Warner's ( AOL) CEO told investors Tuesday that the multimedia conglomerate would spend the near future managing its current businesses, not making momentous deals to acquire new ones.

"Don't look for any transforming deals in the near-term horizon," Parsons said in a luncheon speech at UBS Warburg's Media Week Conference in New York, one in which he said a major goal of the next 12 months was to avoid any more "transforming transactions."

And as if he hadn't already made his point, Parsons added later, "No more large, complicated, transforming deals."

Parsons' distaste for the T-word marks a retreat -- at least in terms of corporate communication -- from the grandiose language that ruled the birth of the merger of America Online and Time Warner when it was publicly proposed nearly three years ago. Back then, during the press conference announcing the deal, Time Warner's then-Chairman Jerry Levin and AOL's then-Chairman Steve Case hammered home the idea of transformation as if it were as noble as baseball and apple pie.

The deal will "transform the landscape of media and communications," said Case, now chairman of AOL Time Warner. The deal "represents the digital transformation of Time Warner," said Levin.

Since then, of course, the mood has calmed down substantially at AOL Time Warner. Since the merger's completion in early 2001, the company's online advertising business has collapsed, AOL Time Warner's stock has slipped more than 70%, the company has come under investigation for certain deals closed before the merger closed, and two of the prime architects of the deal -- Levin and AOL Time Warner ex-co-operating chief Bob Pittman -- have departed the company.

Putting AOL Time Warner in the context of the times, Parsons called the 1990s -- perhaps even the era starting in the mid-1980s -- the "Decade of Deals," a time in which the focus was on creating large, vertically integrated global corporations.

"We got paid for doing deals," he said.

But though people might have thought assembling such companies created value, Parsons had another opinion Tuesday. "What I think it created was the opportunity to create value," he said.

In that light, Parsons predicted that this first decade of the new century will be focused on managing these companies, not building them. The task, he said, will require a management style that's more "collaborative" than that which has been popular for the last half-century. Executives haven't learned yet how to effectively manage these companies they have created, he said.

One AOL Time Warner observer called Parsons' speech a well-pitched message for his Wall Street audience. "These guys have to stay on message and run their business, and he's totally acknowledging it," said John Tinker of Blaylock & Partners. Tinker, who owns AOL Time Warner stock, rates it a buy; his firm hasn't done banking for the company.

Elsewhere in his comments, Parsons said the company expected to end 2002 with $26 billion to $27 billion in net debt, compared with $26 billion at the end of the third quarter. The company won't be "screwing around" with options by swapping or repricing them, said Parsons. Not only would that erode investor trust, he said, but also, "it's just not right," he said.

Finally, Parsons said that although broadband wasn't a must-have for subscribers in the past, the situation has changed, perhaps because younger subscribers expect high-speed connections after enjoying four years of broadband access through college computer systems.

Exactly how many AOL customers are deserting the service for broadband is unclear, though. In Parson's comments Tuesday, he said about a third of customers leaving AOL -- a "substantially" higher number than before -- are switching to broadband.

That figure, however, doesn't jibe with data that AOL Vice Chairman Ted Leonsis gave investors earlier this month, according to which broadband was the third most-common reason for people dropping AOL, behind pricing issues and connectivity problems. Questioned about the apparent discrepancy between Parsons' and Leonsis' statements, an AOL spokeswoman said Tuesday that Parsons had inadvertently overstated the number of subscribers leaving for broadband. She declined to provide the correct figure.

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