Difficulties at Period Warner1
In January 2003, AMERICA ONLINE Time Warner, Inc., declared that it would be posting a loss in $98. 7 billion for the year concluded December thirty-one, 2002, the biggest corporate reduction in U. S. history. While organization exec- utives described the loss as a result of accounting changes rather than problems with constant opera- tions, the media conglomerate plainly faced significant challenges. The stock selling price closed jan at $11. 66, down from $71 in January 2000, when it announced its merger with America On the web (AOL). The gravity with the events of the past few years hit TJ like a sludge hammer. TJ was coming down in the high the lady felt if the CEO called last week to advertise her to a new placement within Period Warner—effective today, September one particular, 2004. TJ set aside her morning caffeine and The Wsj to review you�re able to send operations prior to replying for the first tonto in her inbox.
1I prepared this case with Kyle Anderson and Dong Chen for use like a teaching tool rather than to illustrate Period Warner Inc. 's effective or ineffective handling of adverse managerial challenges. The information a part of this case is based on information that is certainly publicly readily available and that was collected by a variety of industry sources. The memos covered at the end with this case—as very well as those available online by www.mhhe.com/baye7e—were authored by the experts of the case strictly for use as being a teaching application; they do not signify actual firm memos. Any kind of relation among these memos and memos actually dispatched by workers at Time Warner or any other organization is solely coincidental. CIRCUMSTANCE
Challenges by Time Warner 547 HISTORY
Time Warner, Inc., was formed in 1990 by the combination of magazine publisher Period, Inc. and Warner Marketing communications, primarily a producer of film and television pro- gramming. To lower debt, Period Warner offered 25 percent of the time Warner Entertain- ment (which included HBO, Warner Bros., and a part of Time Warner Cable) to Media A single Group. In 1996, Period Warner acquired Turner Transmitting Systems, increasing its cable programming systems significantly. At the conclusion of 1999, Time Warner had income in excess of $27 billion and net income of virtually $2 billion. In January 2000, AMERICA ONLINE and Time Warner released their intent to merge, and the merger was completed one year later. The merger was the major in U. S. business history, with AOL's preannouncement value by $163 billion, and Period Warner's preannouncement value of $100 billion dollars. However , by the time the merger was com- pleted, the value of the mixed firm had dropped to $165 billion dollars. Both businesses hoped the fact that combination of Period Warner's articles and AOL's Internet bottom would provide improved opportunities intended for the combined company to grow. Many ideas had been presented to demonstrate how AOL and Period Warner would be able to combine their Internet and media procedures to enhance the cost of the merged entity. By 2003, AMERICA ONLINE Time Warner had obtained few success in blending the products. Cooperation between the AOL and Period Warner partitions was nonexistent, and adver- tising discounts were dropped due to internal conflicts. The decline inside the value of technology stocks and shares and a sluggish overall economy forced AMERICA ONLINE Time Warner to take a $98. six billion reduction in 2002, primarily because of the write-down in the value of AOL. Gerald Levin, the chairman and CEO of your time Warner before the merger, stepped down because the CEO of AMERICA ONLINE Time Warner in 2002. Steve Case, former leader and CEO of AOL, resigned since chairman of AOL Time Warner in early 2003. Rich Parsons was promoted via COO of times Warner area to the situation of CEO of the firm. Parsons, who was also equiped chairman in the board when ever Case retired, promoted several senior Period Warner exec- utives and accepted the resignations of some of the best AOL supervision. Several commentators and numerous Time Warner investors considered the AMERICA ONLINE merger an error, some even phoning it the " most severe deal in record. ” Various...