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AOL Time Warner Seeks New AOL Chief
Friday July 12, 4:24 PM EDT
By Reshma Kapadia

NEW YORK (Reuters) – AOL Time Warner Inc. (AOL), the world’s largest media company, said on Friday it was looking for a new chief executive for its America Online Internet unit, intensifying speculation on the future of the incumbent, Robert Pittman.

Pittman, who is chief operating officer of AOL Time Warner, returned to the online unit this year charged with getting it back on track. Pittman ran AOL before the company bought Time Warner in January 2000.

“He’s really become a scapegoat,” said SG Cowen analyst Peter Mirsky.

AOL has been suffering from anemic online advertising spending and a slower-than-expected migration of its Internet subscribers to high-speed services, becoming a drag on the whole group.
Tricia Primrose, a spokeswoman for AOL Time Warner, said the company had hired search firm Spencer Stuart. “It should come as no surprise, because when we announced that Bob was going down to AOL in April, we said it was an interim position,” she said.

The company gave no timetable, but some people with knowledge of the search said an announcement would come sooner rather than later, perhaps as early as in two weeks.

Its shares closed down 56 cents, or 4 percent, at $13.14.

The move comes amid an increasing realization that turning around AOL will take more than a couple of months.

“When they said interim, they meant he would get (AOL) quickly turned around, get cash flow growing and have a business direction and then he would gracefully step aside. That’s not what has happened,” said Henry Asher, president of Northstar Group, which owns AOL Time Warner shares. “It’s pretty obvious that’s not the course things have taken.”

OUT WITH THE OLD GUARD?

Investor sentiment — and morale within AOL Time Warner — have soured as its stock has fallen 70 percent since AOL bought Time Warner in 2000 in a deal whose bid to merge old and new media many now question.

“I think Pittman should be fired. He should have been long ago,” said Ajay Mehra, portfolio manager at Columbia Management, which owns AOL shares. “For investors, this is a nightmare and it can’t get worse. Pittman leaving is a good thing. Someone new has to come in.”

Pittman, praised for his operating skills, was seen as one of the best executives to help revive AOL, which has been dragging down the overall growth of the company, home to CNN, HBO, People magazine and Warner Bros. studios.

Pittman was one of the executives who championed the company’s aggressive revenue and earnings growth targets in the face of a slowing economy that devastated the advertising market. The company ultimately slashed expectations, undercutting management’s credibility with Wall Street.

Industry insiders said they would not be surprised to see Pittman leave the company altogether.

“There certainly has been a falling out. He was such a golden boy for such a long time and is now largely reviled within the company,” said veteran industry analyst Gary Arlen, of Arlen Communications. “He looks like a visionary and works like a manager. He really did have a good, long run.”

Speculation had been building since he was passed over last year for the company’s top job, which ended up going to his then co-COO Richard Parsons.

But the company brushed off such speculation. “He is COO and has been, and nothing has changed,” Primrose said. “He’s doing his job today. He’s at a conference.”

Recent management shuffles — such as the departure of Gerald Levin, the former CEO and a key architect of the merger that created AOL Time Warner — have suggested that the company is phasing out the old guard most closely linked to the deal.

The new chief will help resolve questions about AOL’s identity: whether it is going to focus on advertising or new Internet services, Arlen said.

The company has cast its net wide in its search for an AOL chief, including some executives well-versed in interactive businesses, according to a person familiar with the search.

The new AOL chief could come from the ranks of former or current executives at dot-coms like eBay Inc. (EBAY) or Amazon.com Inc. (AMZN) or even rival Microsoft Corp. (MSFT) But if AOL Time Warner can woo a respected media executive, it may prefer that candidate over someone from with interactive experience, the person added.

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