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AOL restructures, forms new units

In a move to reposition itself, America Online is reorganizing its business units and promoting executive Robert Pittman to president and COO.

In a move to reposition itself, America Online (AOL) today announced that it is reorganizing its business units and that it has promoted executive Robert Pittman to president and chief operating officer.

Pittman previously served as president of the company's AOL Networks--a division that, along with ANS Communications, will fade away under the restructuring.

Although expected, the latest moves by the online giant come amidst a flurry of announcements from the company, including news that it is raising its subscriber fees. (See related story)

Shares of AOL jumped 11-15/16, to 110-7/16, up 12 percent from Friday's close of 98-1/2. Nearly 7 million shares traded hands, over four times the average daily volume.

AOL's new lineup will include the addition of two new divisions: AOL Interactive Services and CompuServe Interactive Services. Its AOL Studios division will remain intact.

Analysts said the realignment makes sense, given the acquisitions and divestitures the company has made of late.

America Online, which is expected to announce improved second-quarter results tomorrow, took over CompuServe last week, after closing its acquisition of CompuServe's interactive services division from WorldCom in a three-way transaction. AOL, meanwhile, sold its network division, ANS Communications, to WorldCom and received $175 million in cash for the transaction.

"With the acquisition of CompuServe Interactive Service and the sale of ANS, we today are putting in place a new organizational structure that will extend AOL's global leadership in interactive services and content creation," Steve Case, AOL's chairman and CEO, said in a statement.

Marc Usem, an analyst with Salomon Brothers, said one of the more interesting developments that has resulted from the restructuring is the formation of an AOL investment unit. Len Leader, AOL's chief financial officer, will head the unit, which will identify and execute AOL investment opportunities and manage the company's investment portfolio.

Over the last several years, AOL has invested in approximately 35 public and private companies, ranging from The Motley Fool to Excite.

"My guess is that, by having a specific division, they are positioning to do major acquisitions," said Usem.

Speculation has surfaced over the past few days that AOL may be interested in acquiring Netscape's Web site. However, officials from both companies have declined to comment on the matter.

Usem noted also that the promotion of Pittman, while interesting, comes as no surprise.

Under the restructuring, Pittman will be responsible for marketing, brand management, network programming, content development, technology, network operations, international operations, customer support, human resources, budgeting, and planning.

"He was already doing those things to a significant degree," Usem said. "I think it's a good move for the company."

Ted Leonsis, president of AOL Studios, will be in charge of creating and developing original and local content for AOL's online and Web-based brands worldwide--including the AOL and CompuServe services and AOL.COM--and will oversee plans for future interactive platforms.

Lennert J. Leader, AOL's chief financial officer, will be appointed to the new position of president, AOL Investments, and will be responsible for managing AOL's growing portfolio of investments in public and private companies, executing investment opportunities, and guiding the company's merger and acquisitions strategies. Leader will continue to report to Case, and will assume his new position following the appointment of a new chief financial officer.

Displaced CompuServe employees will receive severance packages ranging from six months' salary to one year's-plus salary, depending on the number of years of service of the employee and his or her position within the company.