Let America Online Inc. (AOL) go its own way. That is the key message of a column penned by AOL co-founder Steve Case and published Sunday in The Washington Post. Case, a key architect of the marriage between AOL and Time Warner Inc., wrote that the merger has been negative for both entities and that it's time for a breakup.
"Although I played a key role in bringing AOL and Time Warner together six years ago, it's now my view that it would be best to 'undo' the merger by splitting Time Warner into several independent companies and allowing AOL to set off on its own path," Case wrote.
The merger's expected consequence -- that Time Warner's media assets would help propel AOL into the broadband world, and that AOL's Internet savvy would accelerate Time Warner's growth -- never materialized, Case wrote. For AOL, which in the mid to late 1990s was the company to beat in consumer Internet service and content, this has meant falling behind more nimble competitors.
"Instead of propelling AOL to new heights, the association with Time Warner has weighed AOL down, while its competitors, such as Google and Yahoo, have made important strides forward," Case wrote.
In July, having concluded that Time Warner's units would never work in an organic, integrated, manner, Case proposed to the board breaking up the media behemoth into "four freestanding companies." This would be Time Warner Cable, Time Warner Entertainment, Time Inc. and AOL.
All resulting companies would benefit from the breakup, but AOL would be "perhaps the one with the greatest potential," in part because the Internet sector is so vibrant right now with high growth companies such as Google, he wrote.
"AOL has spent the last six years wrestling with integration issues -- it needs to be independent now so it can start to regain its leadership position," Case wrote.
Case, who recently resigned from the Time Warner board of directors, is still one of the company's largest individual shareholders with more than US$250 million in holdings. His column stokes the fire that has been burning for several months, as Time Warner's executive management ponders the future of AOL and considers alliances with Google Inc. and Microsoft Corp.
The debate over what to do with AOL has become strident since investor Carl Icahn began in October a blistering and ongoing criticism of Time Warner's management. Icahn is pushing the idea of breaking up the company, and has stated his intention to wage a proxy fight to replace a majority of its board of directors.
When AOL and Time Warner announced their intention to merge in January 2000, the all-stock deal was valued at $350 billion, but when the transaction finally closed a year later, the value was estimated at less than a third of that original price due to the declining value of AOL's stock.
Case is currently chairman and chief executive officer of Revolution LLC, a private investment company based in Washington, D.C. The Washington Post column can be found here: http://www.washingtonpost.com/wp-dyn/content/article/2005/12/10/AR2005121000099.html.
Time Warner didn't immediately return a call seeking comment.