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Last Man Standing-- AOL's Case Still a Target

Critics question his skills as a long-term visionary, but his supporters rally behind him


Steve Case finally has something to do at AOL Time Warner: fight for his job.

Case, often criticized as missing in action during the company's continuing woes, survived a lobbying campaign for his ouster last week by some directors and institutional investors who are dissatisfied with his performance. But his future as chairman remains in question.

The boyish former Pizza Hut manager, who built the world's largest Internet company, must prove he can provide value to the world's biggest media giant that he helped create--but at a time many inside the company don't want his help.

On Wall Street, Case's credentials as a salesman have been tarnished by the company's stock slump and a government investigation of questionable advertising deals, which were made while Case was in charge of America Online.

Critics are questioning his skills as a long-term visionary, and AOL Time Warner Chief Executive Richard Parsons is unwinding some of the cross-company synergies once advocated by Case.

Even the Internet unit in Dulles, Va., where Case, 44, made his name and keeps his primary office, is under the stewardship of young new leaders who don't need the old boss pitching his ideas.

Which raises the question: What's left for Case to do?

Case and other AOL Time Warner executives declined to comment for this report.

But privately, sources said the question of Case's future has set off a war of words inside the company.

It was Case who, at the peak of the dot-com craze, used America Online's fast-rising stock to purchase one of the world's most respected media companies, Time Warner. Since the merger in January 2001, however, AOL Time Warner's shares have lost about three-fourths of their value, closing Friday at $12.53 on the New York Stock Exchange. And the ballyhooed synergies of AOL's Internet business and Time Warner's movie, record, publishing and cable empire have never clicked. In the spring, then-CEO Gerald Levin resigned under pressure. And in July, Robert W. Pittman, former chief executive of America Online and then co-chief operating officer of the combined company, also resigned.

As the last top executive from the Internet side of the company, Case is resented by those who say America Online behaved arrogantly after the merger and then failed to tend its business. They question what Case has been doing for the last year and say his presence causes more harm than good.

"Time Warner people feel completely ripped off and sold down the river and condescended to" by AOL executives, including Case, said a Warner Bros. executive.

Case's defenders quickly note that it was never his job as chairman to oversee day-to-day operations. In fact, they say, Time Warner executives insisted that he stay behind the scenes to avoid confusion about who was running the company.

"That was the deal," said one senior official at America Online. "It's ironic that they complain about it now. Are they inviting him back in?"



Case supporters also dismiss the notion that he has no role in helping to turn around the Internet unit, noting that he helped hire Jonathan Miller, the new America Online chief, and has been welcomed back to help reconceptualize the online service as it tries to switch more customers from dial-up to faster broadband Internet service. In the hallways of the Dulles headquarters, some employees have hung signs reading, "We support you Steve" and "We love you Steve."

Case helped to close a big partnership deal with Sony Corp. to deliver next-generation online entertainment on broadband home networks. And he was key in recruiting Robert M. Kimmitt, former U.S. ambassador to Germany, to lead AOL Time Warner's lobbying office in Washington.

But for most of 2001 he was out of sight, spending much of his time with his brother, investment banker Dan Case, who was ill and died of brain cancer in June.

Analysts say removing Case would do little to help the parent company recover.

"I don't really see how it would change what they're up against," said Nicholas Truitt, a money manager with Strong Asset Management, which owns about 3 million AOL Time Warner shares. "Anyone who gave away more than half the value of their Time Warner shares is justifiably upset, but [ousting Case] doesn't solve the problem."

About nine months ago, Case began to be pressed to take a more active role in the media company, particularly as Levin prepared to exit.

Case earlier this year gave an inspirational speech to the troops in the Atlanta offices, where Turner Broadcasting Systems operates cable channels such as CNN, TBS and Cartoon Network. "He scored big," said one executive, who said staffers were relieved to hear Case's call for more long-term thinking after they had endured cost-cutting that had crippled morale. But divisional executives say there have been no memos, e-mails or speeches from Case since then.

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