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American Morning
AOL Time Warner to Set Record with Giant Quarterly Loss
Aired April 24, 2002 - 09:35 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JACK CAFFERTY, CNN ANCHOR: Some record-breaking news expected today from the parent of this network, AOL Time Warner, and it is not good, either. It is not the kind of record anybody is going to be particularly proud of. Joining us to talk about it is Andy Serwer, "Fortune" magazine's editor-at-large. AOL Time Warner expected to post the largest corporate quarterly loss ever today.
ANDY SERWER, EDITOR AT LARGE, "FORTUNE": Is there anything small about AOL Time Warner? It was the biggest Internet company, the biggest media company, the biggest merger ever. Now we have got the biggest loss ever, the biggest write-off lever -- ever, $54 billion.
CAFFERTY: What went wrong, in plain English?
SERWER: Well, I think there's three things that happened to AOL Time Warner. You look at that stock chart. Is that ugly?
CAFFERTY: Yes.
SERWER: Now, we both -- I don't know about you, I own some stock in this -- our parent company, and I've been suffering, and all kinds of other investors, down 75 percent since the merger was announced.
Three things have gone wrong, Jack. First of all, there is a big ad slump, we know all about that. Hurt companies like CNN and the magazine companies. Number two, slow down in the growth of AOL. AOL still makes money, but the growth is slowing. That's sort of an average thing for a growth company. Obviously, at some point, it can't keep growing like that. And the third thing, the biggest failure of this company, is that it has not been able to justify the merger.
The whole thing about convergence, about distributing content, about broadband, about people trying to buy things over the Internet. Music, content, films, hotdogs, hamburgers, everything. It has not happened, it has happened much slower than the merger -- than the people who put the merger together had anticipated, and Wall Street is disappointed, and there is no plan to sort of take AOL from here to now, which is just to make it a broadband company. There are the executives right there. There's a lot of chiefs there. Jerry Levin, Bob Pittman, Steve Case, Dick Parsons, and Levine is stepping down next month.
CAFFERTY: Was this a bad idea in hindsight? I mean, Time Warner was getting along all right, I think, prior to this merger.
SERWER: You could argue that it was. Of course, this is Monday morning quarterbacking in its extreme (ph).
CAFFERTY: Well, that is what we do best.
SERWER: But that is what we do. But you know, there's a line on Wall Street that you don't need to buy a cow if you want to get some milk. In other words, if AOL and Time Warner had wanted to do business together, they could have done all sorts of joint ventures.
CAFFERTY: Deals. Right.
SERWER: They didn't need to go and buy each other. AOL didn't need to buy Time Warner to make any of this stuff happen.
CAFFERTY: What about the future? Can this thing ultimately work, and the stock price get back to -- you know, levels it was at a year ago? Or was this just a failed idea that is going to have to...
SERWER: Well, that's a toughy. As far as getting back to where the stock was a year ago, I mean, you're talking $50. I think it is going to be very tough to get there that -- very quickly. I think the deal can still work, but it's going to take a lot longer than people anticipated, or if the stock starts to head towards 10, there is going to be real pressure to break this company up. To put AOL together with the cable company, move that off, and then have, basically, the original Time Warner. And, you know, people are suggesting now that those pieces split up would be worth more than the stock is today, which is to say $19, which a lot lower than anyone had expected a year ago.
CAFFERTY: Probably safe to say that ultimately the stock price will drive a lot of the decisions that affect the company.
SERWER: You better believe it. That's the whole deal.
CAFFERTY: All right, thanks Andy Serwer, very much.
SERWER: OK.
CAFFERTY: Andy Serwer.
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