NEW YORK — On Monday, Richard D. Parsons, chief executive-designate at AOL Time Warner Inc., delivered the sour medicine: Revenue and cash-flow growth for the media giant will be slower this year than it had long predicted, possibly in the single digits for both.
But just a day later, Robert M. Pittman, co-chief operating officer, came back with the spoonful of sugar: AOL Time Warner's "future revenue potential" for its average online customer is $159 a month--more than six times the $24 it currently gets.
On the cable-TV side, the upside is just as optimistic, Pittman said: $230 a month per subscriber, versus $52 now.
"AOL Time Warner is a growth company!" Pittman declared to the audience at an investor conference in Scottsdale, Ariz.
Pittman didn't say when this revenue growth might arrive, or exactly how the company will get there from here. In an interview last week, he said he meant for the projections only to illustrate how the business of broadband, or high-speed Internet connections, might develop and didn't mean to imply it would "happen immediately."
The story of AOL Time Warner's union always has been about potential, of course, yet it was odd for Pittman to do such cheerleading while his future boss' sober words still hung in the air.
"We will try not to over-promise," Parsons vowed Monday, "and we will deliver."
The mixed message reflects credibility problems that have dogged AOL Time Warner from the outset and that Wall Street is looking to Parsons to resolve.
Parsons also must confront the fact that the America Online division, once thought to be the main engine of future growth for the company, is showing signs of maturity, although the unit remains the sales leader. The vaunted Internet division may be subject to the same swings as the company's more-established units, such as Time Warner Cable, Time Inc. magazines and Warner Music Group.
In many ways, AOL Time Warner can look back on a solid 2001:
* It completed the $100-billion merger of AOL Inc. and Time Warner Inc.--history's biggest media marriage--Jan. 11, 2001, a year and a day after the deal was announced.
* Amid an economic recession and one of the worst advertising slumps since World War II, the company generated 6% revenue growth and 18% growth in earnings before interest, taxes, depreciation and amortization, also known as EBITDA or cash flow, the most common earnings yardstick for media companies.
* It named a new management team, led by Parsons, a veteran from the Time Warner side, who will take over as chief executive when Gerald Levin takes his early retirement in May.
Pittman, whose roots are in AOL, will become sole chief operating officer. Wayne H. Pace, former finance chief for Turner Broadcasting System, has replaced AOL's Michael Kelly as chief financial officer.
AOL founder Steve Case remains chairman of AOL Time Warner and is expected to take a more active role after largely staying behind the scene's during Levin's tenure.
* A string of blockbuster movies, including "Harry Potter and the Sorcerer's Stone," "The Lord of the Rings: The Fellowship of the Ring" and "Ocean's Eleven" helped the company's Warner Bros. Pictures and New Line Cinema studio units have a record year.
"Harry Potter" and "Lord of the Rings" are seen as franchises that will be minting money for years, from films, games, promotional tie-ins and a host of other spinoffs.
Not all the news has been positive, however.
AOL Time Warner's shares closed Friday at $30.69 on the New York Stock Exchange, about 45% below the post-merger high of $58.51 reached in May and 59% below where the companies stood on the day before the merger was announced.
The stock has been stagnant for months, despite a rally that has swept up much of the stock market. The Standard & Poor's 500 index, for example, is up 18% from its post-Sept. 11 low; AOL Time Warner is up 5%.
The company said Monday that it would take a one-time charge of $40 billion to $60 billion against first-quarter earnings to bring itself into compliance with new accounting rules.
Although the charge does not affect cash operations, it is a painful reminder of the technology meltdown that followed the merger announcement. The charge, which will be the largest in U.S. corporate history if it exceeds $50 billion, reflects the decline in value of the Time Warner assets that AOL acquired.
The Warner Music Group unit, home to stars such as Enya, Linkin Park and Jewel, sustained a sharp dropoff in revenue and cash flow along with the rest of the industry. Analysts said many artists were reluctant to travel after Sept. 11.
Parsons, in his Monday conference call with Wall Street analysts, said the company isn't counting on a rebound in the economy or the advertising business this year.
Sales Growth Targets
Undergo a Revision
Revenue growth for this year, he said, will be 5% to 8%, and EBITDA growth 8% to 12%--far below the solid double-digit growth forecasts that AOL Time Warner had been sticking to for most of last year.
