The burden of great expectations may soon be lifted from America Online's skinny shoulders.
On Thursday, the board of AOL parent
AOL Time Warner
will vote on a proposal to drop "AOL" from the corporate name, according to several newspaper reports.
A name change, which earlier reports say came at the request of new AOL Chief Jonathan Miller, would highlight the diminishing hopes for the online unit at AOL Time Warner. Ironically, the shift comes just as the fortunes for online properties across the media world -- including the greater AOL Time Warner constellation -- appear to be in the early stages of a long-awaited recovery.
Shareholders will surely be happy to see the signs of change, though. AOL Time Warner's shares rose 30 cents Wednesday to $16.35 -- a price down two-thirds from its postmerger peak.
At the time the merger of America Online and Time Warner was proposed in January 2000, the transaction was billed as "the digital transformation of Time Warner" by then-Time Warner Chairman Jerry Levin, and as the spark of "the next Internet revolution" by AOL Chairman Steve Case.
But since the deal closed in January 2001, the actual course of events has signally failed to fulfill the vision. Amid the collapse of the dot-com boom, allegations of inflated revenue recognition and declining numbers in AOL's once-booming subscriber counts, AOL's poor performance translated into serial financial disappointments for AOL Time Warner. Rather than becoming the magic new-media ingredient in an old media company comprising cable systems, TV networks, a film studio and a stable of magazines, AOL became just another division -- an underperforming one at that.
Dragged down by concerns at the online division, AOL Time Warner's stock has risen slightly over the past year, but its performance has lagged far behind those of AOL's online peers
Shares of the other online media giants were mixed at midday Wednesday. Yahoo! was down 2 cents at $35.80, eBay was flat at $54.90 and Amazon was off 33 cents at $45.91.
Bringing Up the Rear
In the fallout from the merger, its chief architects and salespeople -- Levin, Case and former AOL President Bob Pittman -- have all departed the company.
In hindsight, what these gentlemen oversaw was not what Case called "a historic moment -- a time when we transform the landscape of media and communications," according to the FDCH e-Media transcript of the press conference announcing the deal.
Rather, what they presided over was a deal in which AOL shareholders managed to cut a deal for Time Warner assets at a time when the AOL stock they used as currency was at the peak of its market value.
Despite AOL's fall, the online unit is far from valueless. With investors getting hopeful about a sustainable improvement in online advertising, as well as the online unit's ability to offset a decline in traditional dial-up subscribers with new broadband customers, AOL Time Warner's shares have rebounded from their 2002 low of $8.70, plus a sub-$10 relapse in the first quarter of 2003.
But all that remains of the original vision is the name of the company -- a bitter reminder, perhaps, of a moment when the transitory value of AOL looked permanent -- the equivalent of how a Hollywood flavor-of-the-moment might beat out a journeyman actor for top billing, only to crash and burn a few movies later.