AOL Time Warner shakes up top management ranks and accepts resignation of chief operating officer

NEW YORK (AP) _ Bob Pittman, the America Online leader who preached synergy and growth after the company's merger with Time Warner, resigned as chief operating officer of the world's largest media

Friday, July 19th 2002, 12:00 am

By: News On 6

NEW YORK (AP) _ Bob Pittman, the America Online leader who preached synergy and growth after the company's merger with Time Warner, resigned as chief operating officer of the world's largest media company amid deepening malaise about AOL Time Warner Inc.'s ability to live up to its financial promises.

The management shake-up announced Thursday also elevated two of the most highly regarded old-line media veterans from the Time Warner side of the company, HBO chairman Jeff Bewkes and Time Inc. chairman Don Logan. They will split Pittman's duties and report directly to CEO Dick Parsons.

With Pittman out, AOL Time Warner will have replaced many of the senior executives most closely associated with the AOL side of the company as well as with the merger, which has fallen far short of the lofty goals the company laid out when the blockbuster deal was announced in January 2000.

AOL Time Warner shares fell Thursday after the Washington Post published an article detailing what the paper called ``unconventional'' deals to boost revenues before and after the merger between Time Warner and America Online.

The stock had already been under heavy pressure, falling some 60 percent so far this year on concerns about the flagging fortunes of the AOL division following the dot-com meltdown and the credibility of the company's managers, who overpromised growth and were not seen as forthcoming about the company's problems.

The new management lineup was announced by Parsons, who was picked over Pittman to succeed Jerry Levin as CEO. Parsons made the news public after a meeting of the company's board on Thursday.

Parsons had dispatched Pittman in April to fix the problems at AOL, and then news leaked out last week that AOL was already looking for someone to replace him as head of the AOL division.

Pittman had made various efforts to increase central control over the AOL Time Warner businesses, which was resented in some parts of the company that were more accustomed to operating as individual fiefdoms.

The idea was to create ``synergies'' from the merger of AOL with the media business of Time Warner such as selling big-ticket advertising packages that would span across AOL and the other parts of the company.

But many of those promises failed to materialize. Also, Pittman was closely associated with lofty promises for growth that the company made to investors shortly after its merger was announced in early 2000. The company never met those targets, and angered investors by sticking to them long after most observers stopped believing them.

Thursday's Washington Post article stated that AOL used a number of unusual techniques to boost its revenues in the period between July 2000 and March 2002. The merger between America Online and Time Warner was announced in January 2000.

The story, which was based on a lengthy review of confidential documents from AOL, reported that the company converted legal disputes into advertising deals, shifted revenue from one division to another, sold ads on behalf of eBay and booked them as its own revenue.

John Buckley, a spokesman for AOL, said that all the transactions discussed in the piece were ``appropriate and in accordance'' with generally accepted accounting principles and that AOL's auditors, Ernst & Young, had signed off on all the transactions.

Under the restructuring, Bewkes will head up the company's entertainment and networks businesses, which include HBO, New Line Cinema, Turner Networks _ which includes CNN _ the WB network, the Warner Bros. movie studios and Warner Music.

Logan will be in charge of a new media and communications group that will include the company's subscription-based businesses such as AOL, Time Inc. magazines and Time Warner Cable, the nation's No. 2 cable TV operator.

In an interview, Bewkes and Logan said they intended to preserve the autonomy of the company's operating divisions and sounded a more low-key tone on promising the kinds of cross-divisional synergies than Pittman had.

``I don't like the word synergy that much,'' Logan said. ``What we would bring to the table would be a greater sense of urgency in looking for cross-divisional opportunities.''

Ann Moore, a major power behind the hugely successful People magazine, will replace Logan as head of Time Inc. Chris Albrecht, the head of original programming at HBO, will succeed Bewkes as head of HBO.