Armstrong Turns AOL Into Late Night Joke

NEW YORK (TheStreet) -- Reportedly, new Tonight Show host Jimmy Fallon and AOL (AOL) CEO Tim Armstrong will earn the same amount of money this year, about $12 million.

Guess who's getting the bigger laughs?

That would be Armstrong, who made a fool of himself last week by defending a cut to employee 401(k) retirement contributions by blaming two "distressed babies" for the change.

Valleywag promptly delivered the world a chart showing Armstrong's salary and bonuses, measured in distressed babies.

The incident also brought back memories of last summer, when Armstrong fired Patch's creative director Abel Lenz during a conference call.

Speaking of creative directors, when MSNBC asked for someone at AOL to come on the air last week and explain the company's actions, they got David Shing, a "digital prophet" who looks like every father's nightmare of what his daughter might bring home, and who apparently speaks fluent gibberish.

Today, Armstrong has backtracked on the cuts, meaning nothing has been saved, but the damage has been done. Jimmy Fallon singing The Weight with the Muppets is funny and strangely touching. Tim Armstrong and AOL are officially hilarious.

What is amazing is how unforced the errors are. Lots of companies are switching from per-paycheck contributions to lump sum, year-end contributions on 401(k) accounts. IBM (IBM) is doing this. Asked about the move, Armstrong could have simply pointed to IBM.

Looking at the numbers, Armstrong should be riding high.

The company last Thursday reported net income of $36 million, or 43 cents a share, on revenue of $679 million for the December quarter, with revenue for the full year up 6% to $2.32 billion. AOL has successfully transitioned under Armstrong from a company dependent on dial-up revenues to a Web media and advertising company with a future.

Over the past year, the stock has gained nearly 37%.

But no one is crediting Armstrong with any of that, because his way of making headlines is so breathtakingly bad.

Armstrong was hired from Google (GOOG) in early 2009, after he had founded a set of hyper-local sites called Patch that he has tried to turn into a national news network, without success, ever since. Since the company returned to the public market as a Time Warner (TWX) spinoff in late 2009, its value has more than doubled.

Armstrong delivered additional value to AOL shareholders with a 2012 patent sale to Microsoft (MSFT) that brought in more than $1 billion and delivered shareholders a $5.15 per share special dividend.

By selling a controlling interest in Patch to an investment group, Hale Global, Armstrong ended a string of losses that were hurting the company. Buying Adap.Tv for $405 million gave the company a leadership position in Web video advertising.

Instead, all anyone could talk about last week was the distressed baby comment, especially after the mother of one of the babies, Deanna Fei, took to Slate to respond, describing the tortures of her premature infant in detail and providing a picture of said infant, now an apparently happy toddler.

What should have been a corporate highlight, a stock price of more than $51 on Thursday after AOL reported solid results, has instead turned into a corporate low, with AOL seen as a national laughingstock and the shares were recently trading at $46.11. That's a loss of more than $300 million in market cap in two days, entirely off bad publicity, and entirely avoidable.

Or, if you prefer, more than 300 distressed babies.

At the time of publication the author owned shares in GOOG

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

 

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