The announcement came just shortly after the company reported a net loss of $98.7 billion for 2002. Those results included a $45.5 billion fourth-quarter charge related primarily to depreciation in the value of its America Online unit, as well as a first-quarterof $54 billion in accordance with accounting rules changes that took effect last year.
Revenue for the fourth quarter increased 8 percent, to $11.4 billion, from the same period last year, compared with Wall Street estimates of $11.2 billion, according to a consensus of analysts polled by First Call.
Earnings before interest, taxes, depreciation and amortization (EBIDTA) for the quarter rose 16 percent, to $2.8 billion, on the strength of double-digit growth at all of the company's divisions, except for AOL, where EBITDA declined. EBIDTA is one of the most closely watched measures of the performance of media companies.
On Thursday, Wall Street responded to the results by driving the company's stock down $1.96, or 14 percent, to $12 at the close.
In a surprising turn of events, the company said Turner would step down in May, joining a long list of executives who've departed in the two years since AOL took over Time Warner. Intended to create a powerhouse of old and new media, the deal instead set off a bitter corporatebetween the two sides when much-hyped "synergies" failed to materialize.
AOL founder Steve Case, who had been under pressure from unhappy investors including Turner, earlier this month said he wouldas chairman in May, according to sources close to the company.
"After much reflection, I have decided to resign from my executive duties as vice chairman of AOL Time Warner," Turner said Wednesday in a statement. "I have not come to this decision lightly. As you know, this company has been a significant part of my life for over 50 years."
Turner's decision to step down consolidates executive power completely in the hands of CEO Richard Parsons, who willa newly created CEO and chairman role in May.
Parsons' chief tasks include righting the AOL division and managing the company's heavy debt. In its earnings statement Wednesday, the company blamed AOL as the primary drag on its overall performance and laid out a plan to reduce its debt to about $20 billion by 2004.
The company said it plans to use free cash flow to pay down debt as well as "other de-leveraging strategies." Steps in that direction include the recentof its stake in Hughes Electronics for about $800 million, and a planned IPO for its Time Warner Cable unit, which is expected this spring.
Further along the line, the company could consider a spinoff of AOL if the division doesn't show signs of improvement, although the company has dismissed such speculation for now. In the meantime, Parsons and his executive team have begun implementing aplan for the division, although it's too early to judge whether it's working.
For the year 2002, the company reported revenue of $41.1 billion, a 7 percent increase from 2001, narrowly beating analyst estimates of $41 billion, while EBIDTA rose 5 percent to $9.1 billion.
CEO Parsons faces major test
in unifying AOL Time Warner
As , the company's AOL division reported disappointing financial results. For the quarter, the AOL division's EBITDA declined 11 percent during the quarter while its revenue decreased 6 percent. EBITDA for 2002 dropped 22 percent while revenue slipped 4 percent.
AOL's problems went beyond weakness in advertising and e-commerce, with its subscriber base slipping to 35.2 million from 35.3 million in the third quarter of 2002.
The division results weighed heavily on overall operations, which saw good returns from several units, lead by its cable division and movie studios.
The company said EBITDA for its cable unit increased 13 percent in the fourth quarter, while revenue jumped 12 percent compared with the same period a year previous. For the year, EBITDA rose 12 percent, to $2.76 billion, while revenue increased 15 percent, to about $7 billion.
AOL Time Warner's filmed-entertainment division saw both EBITDA and revenue grow 13 percent in the quarter. For the year, EBITDA jumped 21 percent, to $1.23 billion, while revenue grew 15 percent, to just over $10 billion, on the strength of hits including Warner Bros. Pictures' Harry Potter movies as well as the first two installments of "The Lord of the Rings" trilogy from New Line Cinema.
"In 2003, our company will strive to run each of our businesses as well as, or better than, before, with a continued major focus on stabilizing and revitalizing America Online," Parsons said in a statement.
The rebel's final yell
Turner's departure, which will take effect at the time of AOL Time Warner's annual shareholder's meeting, closes a chapter in the remarkable and irreverent career of a modern media baron. The founder of CNN pioneered the way news and entertainment were delivered to homes, and he helped make cable television omnipresent in U.S. households.
Turner sold his cable network to Time Warner in 1996, in an estimated $6.5 billion deal that made him the combined company's single largest shareholder.
Brash and unfettered, Turner's influence as AOL Time Warner's largest individual shareholder started off muted, but became all too apparent over the past year. When AOL and Time Warner shocked the business world on Jan. 10, 2000, with their decision to, Turner was ebullient, saying he voted his 100 million shares in favor of the merger.
The feeling would not last. Five months later, Turner was notified that he would beof his operating responsibility (previously he oversaw Time Warner's cable operations) as vice chairman. The slight incensed Turner and fueled his animosity toward then-CEO Gerald Levin, who he publicly blamed for much of AOL Time Warner's problems. Levin abruptly at the end of 2001 and formally stepped down last May, reportedly shown out the door by Turner's influence on the board of directors.
Turner would continue to influence the management structure of AOL Time Warner and its board. Last September, Turner and two other influential shareholders, Gordon Crawford, a portfolio manager for investment firm Capital Research and Management; and John Malone, chairman of Liberty Media, began rallying for then-chairman Steve Case to, according to two sources close to the company. The wheels were in motion, and by early this month, Case from his role as chairman, opening the door for CEO Parsons to .
Turner's announcement comes as AOL Time Warner investors are able to submit shareholder proposals for inclusion in the company's annual proxy. If, for example, investors wanted to run an opposing slate of directors, they could present it to shareholders at the upcoming annual meeting in May. The deadline to submit shareholder proposals comes 90 days before the date of the next meeting.
An AOL Time Warner representative said Parsons "anticipates" Turner will remain on the board.
"They talk frequently and will be discussing this soon," the representative said.