CEO Is Out at America Online

You don't tinker with success. But

AOL Time Warner

(AOL)

continues to tinker with its executive lineup.

In a sign that the company is still figuring out how to reap synergistic rewards from the January 2001 merger of America Online and Time Warner, the New York media giant said Tuesday that Barry Schuler, chairman and CEO of the key America Online division, is stepping down from his post.

Co-chief operating officer Bob Pittman, already slated to become AOL Time Warner's sole chief operating officer next month, will additionally take back his premerger responsibilities of running AOL's operations.

Schuler, who has headed AOL since the merger closed last year, will run a new division that will develop digital services for AOL Time Warner.

Hard Hit

The move is an unsurprising acknowledgment that AOL has been hit hard by the weak online advertising market, and that the much-vaunted synergies at the multimedia colossus haven't stemmed a falling tide of Internet advertisers.

In a brief commentary, Lehman Brothers analyst Holly Becker said, "This further reinforces our view that the AOL division has serious challenges, despite having reported only one weak quarter and despite very aggressive street projections for slow growth in 2002 and a strong double-digit recovery in 2003." (Becker, whose firm has done underwriting for AOL Time Warner, rates it a market perform.)

AOL Time Warner's shares were down 15 cents Tuesday afternoon, trading at $21.80. The stock is about 30 cents above its 52-week low and has lost more than two-thirds of its value since the blockbuster merger was announced in January 2000, just before the

Nasdaq

began its steep plunge.

Charting the Future

The move bears an uncanny resemblance to the announcement last summer that Joe Collins, longtime head of Time Warner's cable operations, was dropping that post to run a new interactive video division.

"It looks like they're assigning Barry Schuler to the 'Joe Collins' job that

AOL Time Warner CEO Jerry Levin made up after Collins tangled with Pittman," says Peter Krasilovsky, senior vice president at the Borrell Associates consulting firm and a longtime AOL watcher. Collins remains in his video post.

"These moves today make enormous sense for our business," says AOL Time Warner spokesman John Buckley. "Bob is the best possible human being to make the most of America Online's very considerable strengths. Barry is a product innovator whose whole life has been devoted to providing consumers with products that they want and need. These moves play to both of their strengths."

Though Schuler and Collins are both focusing on developing new media, their responsibilities are different, says Buckley. "Barry and Joe are both visionaries and innovators who are helping to chart our course into delivering digital products and services that are just around the corner," he says. "Joe comes at this from a cable and television perspective; Barry comes at this from an online, interactive media perspective. These are both ideal guys for helping the world's largest interactive media company to chart its future."