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AOL Time Warner Board of Directors Meets

Aired September 19, 2002 - 12:28   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.


KYRA PHILLIPS, CNN ANCHOR: The company's stock has plummeted, its chairman is in the hot seat. We could be talking about almost any company, right?
Well, today it's our own: AOL Time Warner.

Here to fill us in on what the board of directors is saying about the chairman, Steve Case, is Greg Clarkin with CNN Financial News.

What's the latest, Greg?

GREG CLARKIN, CNN CORRESPONDENT: Hi there, Kyra.

Well, the latest is the AOL-Time Warner board is meeting here at the Time Life building in New York. It's been going on since this morning. It's a meeting that's expected to last well into the afternoon.

Now the company says, officially, the topic of Steve Case and his chairmanship of the company is not even on the agenda today. But despite those assurances and other assurances the company has made in recent weeks, they really have failed to dampen the speculation swirling around the future role of Steve Case with America Online and Time Warner.

Now if you do recall, Steve Case is the gentleman that built America Online into an internet power. He is also the target, the real focal point of investor anger with the AOL Time Warner deal. And that anger has intensified in recent months as word of two government investigations has come out, one by the SEC, one by the Justice Department. Both of those investigations looking at possible questionable accounting practices at America Online.

Now back to today's meeting. It's expected that Case will survive any challenge to him today. It is said he has enough allies on the board, but some very powerful shareholders are lining up against him, including, reportedly, Ted Turner, founder of CNN. So at this point, Kyra, what we're looking at appears to be a situation that is simmering but really hasn't reached a boiling point just yet -- Kyra.

PHILLIPS: Well Greg, it's obvious why we're interested in this story. I mean, it's a -- it involves our company. But to the average citizen, what do you think the interest is here? Is it the personalities?

CLARKIN: There is a tremendous amount of personalities involved here, Kyra. As I mentioned, you do have Ted Turner, founder of, CNN who has a very active voice in AOL Time Warner. He's the largest shareholder for the company. Also you do have, Steve Case, the gentleman who really championed the internet, built America Online. He has survived the challenge once before when America Online was just AOL, to his power. So at this point do you some have powerful personalities lining up here for what a lot of folks expect could be a protracted battle, maybe culminating next spring in a shareholder meeting when all of the shareholders will have a chance to vote on the issue -- Kyra.

PHILLIPS: All right our Greg Clarkin, thank you.

CLARKIN: Sure.

PHILLIPS: Well, for some added perspective, let's bring in Penelope Patsuris, the senior editor of forbes.com.

Hi, Penelope.

PENELOPE PATSURIS, SENIOR EDITOR OF FORBES.COM: Hi, Kyra.

PHILLIPS: All right, well let's talk about Steve-- there we go. We're live but, what the heck. We'll get you all situated. Now you are front and center, Penelope. Steve Case, how do you think -- what do you think he's saying? How is he convincing board members that he should stay ahead of the game here and in his position?

PATSURIS: I think that -- I think that he's -- I think that he, like the rest of the board right now, they're concentrating on a number of things. They're concentrating -- I mean, the board meeting is designed to figure out basically a new business model, as well as new revenue target growths and a new manner of investor relations because obviously the current one isn't working right now.

I don't think Steve Case is wandering around actively lobbying Ted Turner, you know, to let him stay. I think it is in the company's best interest right now. I don't think we're going to hear about him leaving any sooner than next spring. And even then, if things sort of shape up a bit, or if things even just stop sliding down hill, I don't think Case necessarily has to go. It's really an emotional crescendo that's built and the removal of Steve Case isn't going to bring back ad revenues or e-commerce revenues and it's definitely not going to produce a broadband strategy.

I think everyone's trying to focus. I mean, the official reason for this board meeting is to reinvent the business model, which is far and away more important than, you know, whether Steve Case stays or goes.

PHILLIPS: So, when you talk about the federal investigations and AOL's accounting and the performance of the stock, I mean, whether it be Case or anybody else, can anyone fix those problems right now?

PATSURIS: Well, that's just it. I mean, we don't exactly know what the future holes in store. I mean, neither Case nor anyone else knows what the investigation will uncover. So far it has not brought anything up. But you know it's not over. And so far the SEC investigation into accounting looks pretty small. It looks to be a small revenue figure and it also looks to be kind of a small issue. These swaps were going on, you know, for ages and they should be -- they should be, you know, corrected and so forth. But, I mean, the fact of the matter is that, I mean, so far not much has emerged. No one can predict the future.

PHILLIPS: That's true. I mean the question is too, He may survive now but how long -- how long would his survival last?

Also, how involved is Steve Case in day-to-day operations?

PATSURIS: Well, that's an interesting point and I think that's probably why a lot of the fund managers that I have spoken with that do hold AOL stock, they aren't really that wrapped up in the Case story. I mean, to them it's sort of besides the point. Nobody seems to think that Case has been has been particularly involved in the past year or two. Certainly in the last year, as everyone knows, Steve Case was off basically carrying for his dying brother. So he really was definitely not involved in the day-to-day. And even before then as chairman, he's always been seen as sort of a strategic figure head. So, I mean, people -- you know his advocates are certainly saying, you know, he wasn't down in the trenches with the accounting and the ad sales and so forth.

So, again, I think his removal, if it does come to pass, will be largely symbolic. If we reach a point where we need that symbol to move past, you know, the problems with AOL, then, you know, that may have to be the case. But I think the fact of the matter is he's got a lot of business acumen that's been sort of lost in this outrage shuffle, you know, the Time Warner folks, the employees, the executives, everyone is really mad. They've lost a lot of money. They were basically duped by AOL. Everything has gone haywire, but, I mean, Steve Case is the guy who back in 1998, when AT&T and TCI were merging, Steve Case immediately went down to Washington to begin lobbying for open access on AOL -- on AT&T's -- and other cable network's lines.

PHILLIPS: Penelope, real quickly, because we have to go, unfortunately. But there's been this talk about Ted Turner. What have you heard with regard to Ted Turner possibly coming in and maybe running the company? I've read some editorials, read a few letters sent in to various Web sites. I mean, when you think of CNN you think of Ted Turner.

Could this reinvigorate the company if he indeed he came back in and took over?

PATSURIS: Well, when you say takeover, I mean, I think there's a good chance, I mean, certainly if Steve leaves that Ted will become chairman. But takeover? I mean, Parsons confers with him but he's certainly not going to, you know, oust Parsons.

PHILLIPS: All right, Penelope Patsuris with forbes.com, thank you.

PATSURIS: Thank you.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com







Aired September 19, 2002 - 12:28   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KYRA PHILLIPS, CNN ANCHOR: The company's stock has plummeted, its chairman is in the hot seat. We could be talking about almost any company, right?
Well, today it's our own: AOL Time Warner.

Here to fill us in on what the board of directors is saying about the chairman, Steve Case, is Greg Clarkin with CNN Financial News.

What's the latest, Greg?

GREG CLARKIN, CNN CORRESPONDENT: Hi there, Kyra.

Well, the latest is the AOL-Time Warner board is meeting here at the Time Life building in New York. It's been going on since this morning. It's a meeting that's expected to last well into the afternoon.

Now the company says, officially, the topic of Steve Case and his chairmanship of the company is not even on the agenda today. But despite those assurances and other assurances the company has made in recent weeks, they really have failed to dampen the speculation swirling around the future role of Steve Case with America Online and Time Warner.

Now if you do recall, Steve Case is the gentleman that built America Online into an internet power. He is also the target, the real focal point of investor anger with the AOL Time Warner deal. And that anger has intensified in recent months as word of two government investigations has come out, one by the SEC, one by the Justice Department. Both of those investigations looking at possible questionable accounting practices at America Online.

Now back to today's meeting. It's expected that Case will survive any challenge to him today. It is said he has enough allies on the board, but some very powerful shareholders are lining up against him, including, reportedly, Ted Turner, founder of CNN. So at this point, Kyra, what we're looking at appears to be a situation that is simmering but really hasn't reached a boiling point just yet -- Kyra.

PHILLIPS: Well Greg, it's obvious why we're interested in this story. I mean, it's a -- it involves our company. But to the average citizen, what do you think the interest is here? Is it the personalities?

CLARKIN: There is a tremendous amount of personalities involved here, Kyra. As I mentioned, you do have Ted Turner, founder of, CNN who has a very active voice in AOL Time Warner. He's the largest shareholder for the company. Also you do have, Steve Case, the gentleman who really championed the internet, built America Online. He has survived the challenge once before when America Online was just AOL, to his power. So at this point do you some have powerful personalities lining up here for what a lot of folks expect could be a protracted battle, maybe culminating next spring in a shareholder meeting when all of the shareholders will have a chance to vote on the issue -- Kyra.

PHILLIPS: All right our Greg Clarkin, thank you.

CLARKIN: Sure.

PHILLIPS: Well, for some added perspective, let's bring in Penelope Patsuris, the senior editor of forbes.com.

Hi, Penelope.

PENELOPE PATSURIS, SENIOR EDITOR OF FORBES.COM: Hi, Kyra.

PHILLIPS: All right, well let's talk about Steve-- there we go. We're live but, what the heck. We'll get you all situated. Now you are front and center, Penelope. Steve Case, how do you think -- what do you think he's saying? How is he convincing board members that he should stay ahead of the game here and in his position?

PATSURIS: I think that -- I think that he's -- I think that he, like the rest of the board right now, they're concentrating on a number of things. They're concentrating -- I mean, the board meeting is designed to figure out basically a new business model, as well as new revenue target growths and a new manner of investor relations because obviously the current one isn't working right now.

I don't think Steve Case is wandering around actively lobbying Ted Turner, you know, to let him stay. I think it is in the company's best interest right now. I don't think we're going to hear about him leaving any sooner than next spring. And even then, if things sort of shape up a bit, or if things even just stop sliding down hill, I don't think Case necessarily has to go. It's really an emotional crescendo that's built and the removal of Steve Case isn't going to bring back ad revenues or e-commerce revenues and it's definitely not going to produce a broadband strategy.

I think everyone's trying to focus. I mean, the official reason for this board meeting is to reinvent the business model, which is far and away more important than, you know, whether Steve Case stays or goes.

PHILLIPS: So, when you talk about the federal investigations and AOL's accounting and the performance of the stock, I mean, whether it be Case or anybody else, can anyone fix those problems right now?

PATSURIS: Well, that's just it. I mean, we don't exactly know what the future holes in store. I mean, neither Case nor anyone else knows what the investigation will uncover. So far it has not brought anything up. But you know it's not over. And so far the SEC investigation into accounting looks pretty small. It looks to be a small revenue figure and it also looks to be kind of a small issue. These swaps were going on, you know, for ages and they should be -- they should be, you know, corrected and so forth. But, I mean, the fact of the matter is that, I mean, so far not much has emerged. No one can predict the future.

PHILLIPS: That's true. I mean the question is too, He may survive now but how long -- how long would his survival last?

Also, how involved is Steve Case in day-to-day operations?

PATSURIS: Well, that's an interesting point and I think that's probably why a lot of the fund managers that I have spoken with that do hold AOL stock, they aren't really that wrapped up in the Case story. I mean, to them it's sort of besides the point. Nobody seems to think that Case has been has been particularly involved in the past year or two. Certainly in the last year, as everyone knows, Steve Case was off basically carrying for his dying brother. So he really was definitely not involved in the day-to-day. And even before then as chairman, he's always been seen as sort of a strategic figure head. So, I mean, people -- you know his advocates are certainly saying, you know, he wasn't down in the trenches with the accounting and the ad sales and so forth.

So, again, I think his removal, if it does come to pass, will be largely symbolic. If we reach a point where we need that symbol to move past, you know, the problems with AOL, then, you know, that may have to be the case. But I think the fact of the matter is he's got a lot of business acumen that's been sort of lost in this outrage shuffle, you know, the Time Warner folks, the employees, the executives, everyone is really mad. They've lost a lot of money. They were basically duped by AOL. Everything has gone haywire, but, I mean, Steve Case is the guy who back in 1998, when AT&T and TCI were merging, Steve Case immediately went down to Washington to begin lobbying for open access on AOL -- on AT&T's -- and other cable network's lines.

PHILLIPS: Penelope, real quickly, because we have to go, unfortunately. But there's been this talk about Ted Turner. What have you heard with regard to Ted Turner possibly coming in and maybe running the company? I've read some editorials, read a few letters sent in to various Web sites. I mean, when you think of CNN you think of Ted Turner.

Could this reinvigorate the company if he indeed he came back in and took over?

PATSURIS: Well, when you say takeover, I mean, I think there's a good chance, I mean, certainly if Steve leaves that Ted will become chairman. But takeover? I mean, Parsons confers with him but he's certainly not going to, you know, oust Parsons.

PHILLIPS: All right, Penelope Patsuris with forbes.com, thank you.

PATSURIS: Thank you.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com