Media giant picks CEO for ailing online unit

Ex-USA Interactive official to join AOL Time Warner

August 07, 2002|By BLOOMBERG NEWS

NEW YORK - AOL Time Warner Inc., the biggest media company, named former USA Interactive executive Jonathan Miller chairman and chief executive of America Online yesterday as the Internet unit struggles to revive advertising growth.

Miller, 45, will be responsible for all of America Online's businesses, including the flagship online service, the company said in a statement. He will report to AOL Time Warner magazine chief Don Logan, who also oversees the company's Internet, cable and book units. Miller's appointment is effective immediately.

Miller, who replaces Robert W. Pittman, must rejuvenate America Online's ad sales and customer growth, and restore investor confidence in the unit's finances, investors said.

The Securities and Exchange Commission and the Justice Department are investigating America Online's accounting practices, contributing to a 69 percent drop in the parent company's share price this year.

Logan and Miller "have their work cut out for them," said Jim Stephenson, managing director at Bel Air Investment Advisors, which owns AOL Time Warner shares. "They need to stabilize the business and show the investment community they can grow it going forward."

Miller said his focus will be on making America Online's customers more profitable for the company. He said he plans to move to Northern Virginia, where America Online is based.

Shares of New York-based AOL Time Warner slipped 5 cents to $9.90 on the New York Stock Exchange yesterday.

When America Online, the world's biggest Internet company, agreed to buy Time Warner Inc. in January 2000, executives said the online business would boost the combined company's earnings before interest, taxes, depreciation and amortization by more than 30 percent a year.

The company now says the increase might be as small as 5 percent this year because of lagging sales at America Online.

Ad sales have declined for three straight quarters at America Online, and investors say they are worried that the unit will start losing customers to rivals, especially after high-speed Internet service becomes more widely available.

Miller had been head of the information and services group at USA Interactive, an Internet company run by Barry Diller. Miller oversaw profitable Web businesses such as Hotels.com, an online hotel-reservation business, and Expedia.com, a travel Web site. Before that, he was an executive at Viacom Inc.'s Nickelodeon, the top-rated children's cable-TV network.

The top job at America Online has been vacant since last month, when Pittman, the interim CEO, who was also chief operating officer at AOL Time Warner, left the company. Pittman had been president of America Online before the merger.

Pittman and former AOL Time Warner CEO Gerald Levin promoted the profit potential of America Online. Levin stepped down in May and was replaced by Richard Parsons, who had been the company's co-chief operating officer with Pittman.

Pittman's departure left AOL Time Warner Chairman Steve Case as the company's sole top executive remaining from the former America Online.

Several investors said Miller's stint with Diller is an advantage.

"Diller likes him, and an endorsement from Diller is a pretty good endorsement," Morris Mark, general partner of Mark Asset Management, said last week when news of Miller's likely appointment was first reported. Mark Asset owns shares of AOL Time Warner and USA Interactive.

About a month ago, Miller left his executive post at New York- based USA Interactive to head General Catalyst, a private equity firm in Boston. Under the arrangement, Miller was to remain an employee of USA Interactive until his contract expired at the end of this year.

America Online is in the middle of two federal inquiries. Last month, AOL Time Warner said the Justice Department and the SEC had started investigations into America Online's accounting practices.

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