Case, AOL founder, quits Time Warner

Architect of ill-fated merger resigns from board as Web service starts to revive


America Online co-founder Stephen M. Case, who orchestrated his company's often-ridiculed takeover of Time Warner Inc., resigned from the media giant's board yesterday - just as the era of digital entertainment he envisioned is taking shape.

Case's departure comes as AOL's stature within Time Warner has grown. Once a weight around the company's neck, AOL now is seen as crucial to delivering Time Warner's vast array of content and competitors such as Microsoft Corp. and Google Inc. are vying to buy a minority share.

"Over the past few months, I have been pleased to see a renewed focus on AOL at Time Warner, and the emergence of so many strategic alternatives," said Case, who stepped down as chairman two years ago but remains one of Time Warner's biggest individual sharehold- ers.

He said he was resigning to devote more time to Revolution, the company he launched in April to finance health-care and lifestyle businesses.

"Leaving Time Warner's board," he said, "will give me a greater opportunity to grow Revolution, including avoiding any potential conflicts of interest as Revolution moves into new areas."

But analysts were split in their interpretation of Case's departure.

"Our guess is, it means the board of Time Warner has decided definitively to sell a piece of AOL, and that has upset Steve Case," said Laura Martin, senior media analyst with Soleil/Media Metrics.

"I don't think people resign from boards because everyone thinks things are fine. He wouldn't just leave suddenly on a Monday morning," Martin said.

Under pressure to boost its stock price, Time Warner is negotiating with Microsoft and with Google for a stake in AOL. A person close to Time Warner suggested that AOL's negotiations played a "secondary" role in Case's decision to step down. Case was not opposed to such a deal, the person said, but apparently felt he wouldn't have much voice in setting AOL's course.

"He believes the advice he would give would be refracted through the prism of other board members saying, `But you have a history here,'" the source said.

Mark Stahlman, technology strategist for Caris & Co., said he takes Case at this word.

People of Case's stature often stay at a company until they feel it's finally pointed in the right direction, the analyst said, and the renewed interest in AOL's so-called "audience" business - the home page and other free services supported by advertising - shows that AOL is regaining its stature as a significant Web player, capable of becoming a more powerful Web player.

"What Time Warner is doing, instead of selling his baby, is finally putting AOL in a position where it can succeed," said Stahlman, who helped take AOL public in 1992 as an investment banker with Alex. Brown & Sons.

Whatever the reason, Case's departure ends his career with Time Warner. In 1985 he joined the company that would soon become AOL and oversaw its rise to the world's largest Internet service provider, with a peak of 26.7 million U.S. subscribers in September 2002.

In 2000, with AOL's stock heavily inflated by the dot-com bubble, then nearing its height, Case and then Time Warner CEO Gerald Levin together pushed through the $99 billion union of their two companies. The deal proved disastrous, cutting $200 billion from the company's value and leading to the ouster of most of the deal's chief proponents. Case was one of the last to remain.

Lately, Time Warner has been under pressure from activist shareholder Carl C. Icahn and a group of allied investors to take drastic measures to boost its share price, which is still about 75 percent below the levels reached before the AOL-Time Warner deal was announced in early 2000.

Time Warner has disagreed with Icahn's proposals, which include completely spinning off its cable TV subsidiary and stepping up a share repurchase program.

Icahn also has criticized the fact that several directors who approved the AOL-Time Warner deal remain on Time Warner's board. Many investors, however, seem to agree with current Time Warner CEO Richard D. Parsons' focus on turning around AOL.

Chris Gaither writes for the Los Angeles Times. The Associated Press contributed to this article.


Stephen M. Case, a co-founder of America Online and one of the key architects of the disastrous AOL-Time Warner merger, resigned from Time Warner Inc.'s board of directors yesterday.

April 2005-present:

Chairman and CEO, Revolution LLC(an investment company)

November 2004-present:

Chairman, Exclusive Resorts LLC (a membership-based luxury real estate company) January 2001-May 2003:

Chairman of the board, AOL Time Warner 1995-2001: Chairman, AOL

1993-2001: CEO, AOL

1985-93: Other executive positions, AOL

Source: Time Warner


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