When President Bush declared on Monday that the nation was waking up with a hangover after the economic boom of the last decade, he could not have known how much more pain was on the way. By week's end the stock market had plunged a further 7 percent, reaching lows it had not seen since 1998.
One of the week's biggest losers was AOL Time Warner, a company whose stock has been in virtual free fall all year. In an attempt to turn around its own flagging fortunes, AOL Time Warner announced a major management shake-up, designed to take the company in a new direction and undo the damage of a merger that now stands as one of the biggest blunders in corporate history.
Of all the giddy corporate moves of the 1990s, none now look more wrongheaded than Time Warner's decision to sell itself to AOL in a deal that put a higher value on the now-struggling Internet service than on Time Warner's vast stable of blue-chip media properties. After years of fumbling to come up with an online strategy, Time Warner decided to thrust itself into the New Economy by combining with AOL. Unfortunately for Time Warner shareholders, the CEO, Gerald Levin, chose precisely the wrong time to make his move.
With AOL stock near its peak, he accepted a deal in which his shareholders were given just 45 percent of the combined company, even though Time Warner's divisions produced some 80 percent of the revenues.
The credo of the combined AOL Time Warner was synergy, the idea that the companies would be greater than the sum of their parts because each of the divisions would help market the others. But the dream never materialized. The fast-growing AOL online service was supposed to be the juggernaut that would cause the whole company to grow at 30 percent a year. It turned out that AOL was unable to sustain its own growth rate, much less carry Time Warner.
AOL Time Warner has taken a beating since the two companies combined. The stock has plummeted. In January management was forced to announce a US$54 billion goodwill write-down, a stunning admission of just how bad things had gotten. To turn things around, Stephen Case, the company chairman, and Richard Parsons, the newly installed CEO, will need to win back the trust of Wall Street.
With this week's personnel changes, Parsons -- who himself came from Time Warner -- forcefully reasserted the dominance of Time Warner culture within the merged companies. He accepted the resignation of the chief operating officer, Robert Pittman, who came from the AOL side, and divided Pittman's job between Don Logan, head of the Time Inc. magazine division, and Jeff Bewkes, chairman of HBO. Tellingly, the AOL online division will now report to Logan, who has spent his career in print and once said the Internet gave "new meaning to the term `black hole.'"
Logan and Bewkes are expected to decentralize operations and emphasize strong media content.
Shareholders may welcome the new direction. Still, two new appointments do not make a turnaround.
Parsons has yet to enunciate a clear vision of where he wants to take AOL Time Warner.
Before anyone gets too excited about the restoration of Time Warner culture, it is worth remembering that it was Time Warner management that blundered into the AOL deal in the first place.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The New Taiwan dollar and Taiwanese stocks surged on signs that trade tensions between the world’s top two economies might start easing and as US tech earnings boosted the outlook of the nation’s semiconductor exports. The NT dollar strengthened as much as 3.8 percent versus the US dollar to 30.815, the biggest intraday gain since January 2011, closing at NT$31.064. The benchmark TAIEX jumped 2.73 percent to outperform the region’s equity gauges. Outlook for global trade improved after China said it is assessing possible trade talks with the US, providing a boost for the nation’s currency and shares. As the NT dollar
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
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