AOL Time Warner Inc's board will met yesterday to discuss a management shakeup as the world's largest media company seeks a new leader for its Internet unit, an AOL executive said.
The board will consider promoting Home Box Office Chairman Jeff Bewkes, 50, and Time Inc. Chairman Don Logan, 58, said the executive who declined to be identified. America Online said last week that it's seeking a new chief executive for its America Online unit run by Chief Operating Officer Robert Pittman, 48.
The shakeup may put more control in the hands of executives of the former Time Warner, purchased by America Online for US$106 billion in January 2001. Publishing and broadcasting executives have gained influence at AOL as the Internet unit failed to reach profit goals because of slumping online advertising sales. The parent company's shares have dived 70 percent in the past year.
"The original AOL business isn't doing very well, so this might be an indication that people from the old economy side of the company are stepping forward and are becoming more important," said Boris Boehm, fund manager with Nordinvest in Hamburg, which manages about US$5.8 billion, including AOL shares.
Pittman is about to leave AOL, the Wall Street Journal reported yesterday. He couldn't be reached to comment. Company spokesmen Edward Adler and Andrew Weinstein declined to comment on the board meetings or management changes.
"AOL has the best assets in the industry," said Doug Blatch, who manages US$200 million at the Investec Wired Index Fund, which includes AOL shares. "They just need to try to coordinate that and a new person coming in is a good opportunity to do that."
AOL said last week it hired executive search firm Spencer Stuart to find Pittman's replacement. Pittman was put in command of the Internet unit three months ago and attempted to reverse the business's slowing sales and a decline in customers.
Separately, the Washington Post, citing company documents and former company executives, reported yesterday that the company's America Online Internet unit used unconventional transactions to boost its advertising revenue by about US$270 million during the period from July 2000 through March 2002.
unconventional
Among the unconventional tran-sactions America Online used from the third quarter of 2000 through the first quarter of this year were converting legal disputes into advertising transactions, booking sales of advertisements sold on behalf of EBay Inc as its own revenue, and bartering ads for computer equipment in a transaction with Sun Microsystems Inc, the Washington Post said.
Without the unusual maneuvers, which added up to about US$270 million during that period, AOL would have missed analysts' estimates for ad sales growth in three quarters, the paper reported. The transactions helped the company to beat Wall Street earnings expectations in two quarters in 2000, the Post said.
The company's accounting for these transactions was appropriate and in accordance with generally accepted accounting principles, Weinstein said. They were reviewed by AOL Time Warner's auditor, Ernst & Young LLP, he said. The transactions amounted to less than 2 percent of the company's revenue over the period and didn't affect the company's net income, Weinstein said.
Shares of AOL Time Warner yesterday rose US$0.50 to US$13.11.
They have fallen 59 percent this year.
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