Without doubt the biggest reason for AOL Time Warner’s ATW) $99 billion loss is poor fiscal management and leadership by Chief Executive Officer (CEO) Richard D. Parsons. For example, Parsons allowed the cable division to record advertising fees from new networks all at once instead of gradually. Since the company is no longer adding new networks, this move ensures sharp declines in growth because of falling advertising fees. As one investor who sold his AOL Time Warner stock proclaimed, “This happened under his watch” (1). AOL Time Warner finds itself in dire straits in the long gone wake of high expectations when the merger was announced. Stock prices have tumbled more than 85% to a low of $11.66 and the company is frozen by the dual economic dilemma of enormous debt ($27 billion) and flat profits (1). Many argue Parsons is responsible for such realities, based on his mismanagement of the company and leadership that many find untested in the media business. So, too, many argue his leadership lacks the kind of aggressive visionary the company direly needs to turn-a-round the faltering company.
Parsons’ plans for achieving the $4-$5 billion necessary to write down company debt remain unknown and those he offers as strategies to achieve this goal seem weak. In a down economy filled with wary investors, plans to sell off various divisions of the company are not met with encouragement by economic analysts or investors. Though Time Warner stockholders before the merger are eager to dump a company that has eroded their stock value (AOL), analysts suggest such a move would be foolish if Parsons tries to sell the company in a down economy with rock-bottom stock prices without trying to turn it around. Parsons also seems eager to divest himself of responsibility. He argues that the advertising gaffe is the result of accounting policies in the cable division not of his making.
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