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...Time Warner chief executive Gerald Levin and AOL boss Steve Case, the common experience of groping through a rapidly mutating economy made this deal in some ways inevitable. In AOL, Case had built a brand, a customer base and (by Internet standards) healthy profits. But he faced a future that may see Internet access become a commodity, and he lacked access to the leading source of broadband--the fat, fast pipes of cable television that could carry vast amounts of Internet content. And Case didn't have much in the way of content either. Time Warner's cable-television system...
Levin reasoned that Time Warner without an Internet connection was still valuable, but its value to an Internet buyer was greater. So he arrived at 1.5 AOL shares to be exchanged for each TWX share. In real money, that was 70% more than Time Warner's $65 price the Friday before the deal was announced, but it would still give AOL shareholders 55% of the company. Conversely, Time Warner was providing 80% of the cash flow. Says Levin: "If some people think that AOL has been sold at too much of a discount or Time Warner has been sold...
...precisely this combination of decentralized structure and a desperate hunger for Wall Street-pleasing growth--especially necessary for a company whose balance sheet includes $17.8 billion of indebtedness--that propelled the sale to AOL. Time Warner's stuttering, stumbling, ill-managed attempts to score on the Internet (in which I and several of my Time Inc. bosses have participated) have foundered on the inability of the various divisions to work collaboratively and on the relentless bottom-line pressure that discouraged investment in the distant future when there was a quarterly target to meet...
...AOL, of course, has had no such problem. Ever since Case fought off the awful negative publicity surrounding the late 1996 fiasco in which customers couldn't access the overburdened servers, the company has been rocketing from one success to another. The number of AOL zillionaires has multiplied with each upward ratchet of the stock price, and the atmosphere in Dulles sometimes feels like it's ready to combust. The unnamed Time Warner executive who told the New York Times that merging the cultures would be easy because the AOL people are laid-back "latte drinkers" would do well...
While Case plays the statesman and AOL president Robert Pittman deploys the substantial charm of a born salesman, the next few levels of management harbor a cadre of "killers and cutthroats," says a former analyst intimately familiar with the company. AOL's laid-back latte drinkers took early retirement ("I just didn't want to sit in on any more screaming matches," says one), while the real sharks, believing themselves invulnerable because of their vast wealth, continued to swim the halls in Dulles. The piped-in music may be the Eagles, and the furnishings may look as if the Ikea...