NEW YORK (CNN/Money) -
Steve Case, the embattled chairman of AOL Time Warner Inc., surrendered to critics Sunday, announcing he would give up the board's top post at the shareholders' meeting in May.
Case, the co-founder of America Online, engineered the purchase of Time Warner Inc. in a deal announced three years ago and completed a year later. But the combined company, which includes CNN/Money, has never lived up to pre-merger expectations, and the stock has declined substantially since the merger was completed.
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"This company does not need distractions at this critical time," said a statement from Case released Sunday evening. "Given that some shareholders continue to focus their disappointment with the company's post-merger performance on me personally, I have concluded that we should take steps now to avoid the possibility of that effort hindering our ability to pull together as a team and focus fully on our businesses."
AOL stock was up 4 percent in European trading at 14.48.
Problems linger for AOL
Plans for Case's departure comes amid speculation that the company is close to writing down the value of its assets by billions due to the reduced value of its troubled Internet service provider, America Online, since the merger.
The move would come after a record $54 billion charge a year ago and could cause further problems for its already strained balance sheet. The company said in October it probably would take a "substantial" noncash goodwill impairment charge in the fourth quarter to reflect the reduced value of AOL.
AOL Time Warner (AOL: Research, Estimates) is set to report financial results Jan. 29. Analysts surveyed by First Call expect it to report fourth quarter earnings of 26 cents a share excluding special items, equal to year-earlier results.
Shares of AOL Time Warner, which closed Friday up 55 cents to $14.88, lost more than half their value last year and are off 68 percent since the merger closed in January 2001. They are down nearly 80 percent since the deal was first announced.
Steve Case will step down officially in May, according to an AOL Time Warner statement.
The decline in the stock has prompted criticism from many shareholders, including Ted Turner, vice chairman of the company and its largest shareholder, who has seen his personal fortune fall by billions with the decline in the stock.
Turner said in a statement, "I admire Steve Case's decision to put our company and its employees first, and I am delighted that he will remain on the board and be active because frankly, we really need his experience and vision."
No successor for Case as chairman was announced Sunday, nor was any timetable for a decision given. Company spokesmen were not immediately available Sunday to comment on plans for a successor.
Case will remain on the company's board of directors and says he believes he can continue to play a valuable role as the co-chairman of the board's strategy committee.
"Despite the current cynical view on Wall Street, there is growing evidence on Main Street that consumers increasingly desire and demand more choice, convenience, and control from the media they consume," said his statement. "I will continue to advocate a forward-looking view, so that when the environment and our performance improve, our company will be well positioned to benefit from these trends."
Thinning AOL representation
Case's departure continues and in some ways completes the loss of influence of executives from the AOL side of the merger. Robert Pittman, who had been Case's No. 2 at America Online, left the company in July as two Time Warner veterans, Don Logan and Jeff Bewkes, assumed more power, with Logan getting ultimate responsibility for AOL.
When the America Online unit named a new president in August it was an outsider, Jonathan Miller, a veteran of USA Interactive, who was chosen for the job.
AOL, the world's largest Internet service provider, has been seeing its key advertising and commerce revenue fall, along with its profits. Long-term ad deals signed before the bursting of the Internet bubble are expiring. And some of its 35 million customers are changing from its dial-up service to either high-speed Internet connections with their cable of phone companies, or to lower-cost dial-up service offers.
Case co-founded America Online in 1985, and it soon overtook more established ISP's to become the industry leader. He weathered past problems at AOL, including a shift to unlimited service for customers in 1997, which overloaded the company's servers and made it difficult for many customers at that time to even connect to the service.
By the end of 1999 AOL and other Internet companies were riding high, giving it a stock value that allowed it to purchase Time Warner Inc., a publishing, broadcasting and entertainment conglomerate that was also one of the nation's largest cable operators. But Internet stocks started a steep decline several months later, reducing the value of AOL stock used to buy Time Warner by more than third once regulatory approval was achieved almost exactly a year later.
The last year has also raised questions about the accounting practices employed by AOL before the closing of that deal, which some critics suggest improperly inflated its stock price at that time. In October the company restated past results, erasing $190 million in revenue and $97 million in the previous two years. The company is subject of Justice Department and Securities and Exchange Commission probes into its accounting practices, although company executives maintain there was no wrongdoing.