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AOL's Levin stepping down
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December 5, 2001: 5:05 p.m. ET
Richard Parsons will succeed him as CEO of No. 1 media company.
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NEW YORK (CNN/Money) - Jerry Levin will retire as chief executive of AOL Time Warner in May 2002, and co-chief operating officer Richard Parsons will succeed him, the world's biggest media company said Wednesday.
Robert Pittman, currently co-chief operating officer with Parsons, will become the sole COO of New York-based AOL Time Warner, formed at the start of the year from the merger of America Online, the biggest Internet service provider, and Time Warner, owner of CNN and CNN/Money.com, Time magazine, Warner Brothers studios, Time Warner Cable and other properties.
Pittman, who came from the AOL side of the merger, had been seen by some as the more likely successor to Levin than Parsons, who came from the Time Warner side. Pittman had been given responsibility for more of the company's operations since the merger, although Parsons had overseen its content units.
"I think the Street's probably a little surprised that Dick Parsons is going to be the CEO. Bob Pitman is very well respected," John Corcoran, analyst with CIBC World Market told CNNfn's Market Call. "But when you drill down, Dick really runs all their content operations. Content will become more important to AOL Time Warner going forward." (229KB WAV) (229KB AIFF)
The deal comes as AOL Time Warner is in the closing rounds of bidding for the broadband operations of AT&T Corp. (T: down $0.02 to $17.57, Research, Estimates), a move that if successful would give the company the greatest cable and high-speed Internet access to U.S. homes of any company.
The merger of AOL and Time Warner has yet to produce all of the synergies promised by Levin and former AOL CEO Steve Case, who will continue as chairman of AOL Time Warner after this combination. The combined company has also been hurt by weakness in the U.S. advertising market that has led to lowered revenue and profit targets and a sagging stock price.
While shares of AOL Time Warner (AOL: up $1.08 to $35.83, Research, Estimates) gained in trading Wednesday following the announcement, they are still off nearly 25 percent from the $46.47 trading price at the end of the first day as a combined company Jan. 12.
Cable pioneer Levin survivor of numerous mergers
Levin, 62, is a consummate pro in corporate politics who was a veteran of the deals that joined Time Inc. and Warner Communications in 1990, and the company's purchase of Turner Broadcasting in 1996, in addition to the AOL-Time Warner combination.
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Gerald Levin
AOL Time Warner CEO to leave company in May. | |
Levin joined Time Inc. in 1972, when its Home Box Office unit was still in development. Initially hired to do legal work for HBO, he became its CEO in 1973 and made the decision to broadcast it via satellite, helping to mold the modern cable industry.
He became co-CEO of Time Warner soon after the merger, sharing the spot with former Warner boss Steve Ross until Ross's death in 1992.
Time Warner's purchase of Turner Broadcasting made its founder, Ted Turner, the combined company's largest shareholder, but Levin stayed in charge despite clashes with Turner. Turner recently made a speech saying his biggest regret was not maneuvering the departure of Levin before he was pushed out of the company himself.
There were few signs Wednesday that Levin was pushed out in the latest move. His letter to employees said he wanted to devote more time to personal and charitable causes that became important to him after the death of his son, a inner-city public school teacher who was killed by a former student.
"When I returned to work after the death of my son, Jon, in 1997, I had a special provision inserted in my employment agreement that allows me to choose not to fill out my term," Levin said in an e-mail sent throughout the company. "I felt that once my work was completed and I was satisfied with the company's direction and progress, I'd invoke that provision... That time has arrived."
Levin turns 63 next May 6, about the time he will be leaving the company.
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Jerry Levin explains his reasons for leaving to CNNfn's Lou Dobbs
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While some Wall Street analysts were only surprised that Parsons took the CEO slot ahead of 48-year-old Pittman, many others were stunned that Levin was stepping aside at all.
"I would say it was a shock. I think a lot of people expected him to remain in tenure for at least another two or three years," Kaufman Brothers analyst Paul Kim told CNNfn's The Biz program. He also wondered if Levin was leaving due to a disagreement over the bid for AT&T's cable unit.
"Jerry Levin said in public comments that there was no timetable for how long his tenure would be," Kim said. "Something has changed in the past week or two, and the only thing we can point to is AT&T Broadband.
"At this point, it's pure speculation, but perhaps that was an area of rift within the executive ranks," he said, referring to the company's strategy regarding a possible bid for AT&T Broadband.
Levin leaves with 2.3 million common shares of the company's stock worth $81.8 million, according to the company's March proxy statement. His charitable foundation holds another 327,000 shares worth $11.7 million.
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But he has another 9 million stock options, many of which are likely priced above current market prices and thus essentially worthless. If the company's stock price does not rebound before he leaves the company in May, he could stand to likely lose millions due to his earlier-than-expected departure.
Parsons joins short list of African American CEOs
With his ascension, Parsons, 53, goes to the head of a small list of African-American CEOs, including Franklin Raines of Fannie Mae (FNM: down $0.47 to $77.85, Research, Estimates), Kenneth Chenault of American Express Co. (AXP: up $1.26 to $34.61, Research, Estimates) and Stanley O'Neal, who is in line for the CEO position at Merrill Lynch & Co. (MER: up $2.48 to $52.52, Research, Estimates).
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Richard Parsons
Co-COO of AOL Time Warner to assume CEO job next May | |
Parsons' only previous stint as a CEO was with Dime Bancorp Inc. (DME: down $0.72 to $34.00, Research, Estimates), his last job before joining Time Warner. As president and a member of the board of directors at Time Warner, Parsons ran the company's film and music groups, while also overseeing its human resources operations and public affairs.
Though his ascension may be somewhat surprising, the variety of his experience with AOL Time Warner may have given him an edge over Pittman.
Parsons also has a long history of political involvement, serving as counsel for Nelson Rockefeller, a staff aide to President Gerald Ford and current co-chairman of President Bush's Commission to Strengthen Social Security. 
- from staff and wire reports
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CHANGES AT AOL TIME WARNER
