Year in review: AOL troubles

The union between the world's largest Internet company and the world's largest media company became a nuptial nightmare in 2002.

How could something that seemed so right go so wrong?

Sure, the swagger displayed by America Online executives trying to tell Time Warner veterans how to run their businesses rubbed many the wrong way. But AOL's money problems were the real undoing.

Once considered the "jewel in the crown" by former AOL Time Warner Chief Executive Gerald Levin, AOL has watched its online advertising revenue nosedive. Earlier this month, AOL Time Warner announced that advertising and commerce revenue for the online division would drop 40 percent to 50 percent in 2003. That's on top of a Securities and Exchange Commission investigation into AOL's accounting practices, an internal investigation that forced AOL Time Warner to restate earnings by $190 million and sent angry shareholders looking for their next scapegoat to hang.

AOL Time Warner's stock price, which traded as high as $35 at the end of 2001, has fallen as low as $8.70 largely because of AOL's troubles. In reaction, AOL Time Warner's board of directors has chopped enough heads to give Henry VIII a run for his money.

Here's a partial list of executives that have since departed from AOL Time Warner's Rockefeller Center executive suite and AOL's Dulles, Va., bunker:

Gerald Levin, former AOL Time Warner CEO; Robert Pittman, former AOL Time Warner co-chief operating officer; J. Michael Kelly, former AOL Time Warner chief operating officer and currently head of AOL's international operations; Kenneth Lerer, AOL Time Warner's former communications head, now in a newly created position; Mayo Stuntz, former executive vice president at AOL Time Warner; Marshall Cohen, also former executive vice president; Barry Schuler, former CEO of the AOL division; James de Castro, former president of AOL's interactive services division.

The story's not over. For the past two months, speculation has heightened that members of AOL Time Warner's board have joined with influential shareholders to orchestrate Chairman Steve Case's ouster. AOL Time Warner continues to insist Case's job is secure, but all bets are off from a company that once seemed invincible in the eyes of futurists.

Earnings to come up short
AOL Time Warner says 2001 earnings will come in well below its previous financial forecasts, and it gives lowered estimates for 2002. A change in accounting practices also will require the company to report the cost of its merger.

AOL chief Barry Schuler steps down
In yet another setback for the AOL side of the combined company, Barry Schuler resigns his post to Time Warner's Bob Pittman. Although AOL acquired the media titan, its strength has waned with the dot-com decline as outgoing execs hand the mantle to Time Warner executives.

Parsons brings execs in line
A week after ascending the throne, AOL Time Warner CEO Richard Parsons reorganizes the company's upper echelon to expand the pool of executives reporting directly to him, according to a memo seen by CNET News.com.

No. 2 exec hands in resignation
Robert Pittman relinquishes his role as AOL Time Warner's chief operating officer, making CEO Richard Parsons and Chairman Steve Case the only members remaining of the core executive team conceived during the merger.

SEC probe overshadows profit
Immediately following AOL Time Warner's announcement that it narrowly beat Wall Street expectations for the second quarter, the company says the Securities and Exchange Commission would be looking into its accounting practices.

Search for permanent CEO ends
Former USA Interactive executive Jonathan Miller claims the post of chief executive of America Online, ending the search for a permanent CEO for the AOL Time Warner unit since Barry Schuler stepped down.

Management overhauled in HBO move
AOL Time Warner CEO Richard Parsons explains the reorganization of America Online like this: "If (AOL) is going to live, and I think it is, it will be somewhat like HBO" and schedule programming that people are willing to pay for.

Will Case get canned?
As calls for an AOL spinoff fade, there's speculation about other forms of blood-letting. Chiefly, whether AOL Time Warner Chairman Steve Case will find himself locked out of the office.

Investigation finds inflated numbers
An internal audit ends with AOL restating financial results for the period between Sept. 30, 2000, and June 30, 2002. The restatement reduces revenue by $190 million and erases $97 million in qualified earnings from its books.

Top America Online exec departs
James de Castro's future at AOL became questionable after COO Bob Pittman resigned. Now de Castro is leaving his post as president of AOL's interactive services division, saying "I'm now looking for an opportunity to run a company."

Time for some housecleaning
AOL Time Warner reacts to America Online's financial struggles with plans to revamp the unit. "Starting tomorrow, it's all about execution," AOL Time Warner Chairman Steve Case says.