AOL Time Warner loses Turner now - and $99bn

Ted Turner is resigning as vice chairman of AOL Time Warner, capping a tumultuous year for the beleaguered media giant.

The announcement came just shortly after the company reported a net loss of $98.7bn for 2002. Those results included a $45.5bn fourth quarter charge related primarily to depreciation in the value of its America Online unit, as well as a first quarter charge of $54bn in accordance with accounting rules changes that took effect last year.

Revenue for the fourth quarter increased 8 per cent, to $11.4bn, from the same period last year, compared with Wall Street estimates of $11.2bn, according to a consensus of analysts polled by First Call.

Earnings before interest, taxes, depreciation and amortization (EBIDTA) for the quarter rose 16 per cent, to $2.8bn, 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.

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 corporate struggle between the two sides when much-hyped 'synergies' failed to materialise.

AOL founder Steve Case, who had been under pressure from unhappy investors including Turner, earlier this month said he would step down as 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 on 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 will take over a 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 $20bn by 2004.

Turner's departure, which will take effect during 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 US households.

Turner sold his cable network to Time Warner in 1996, in an estimated $6.5bn 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 10 January, 2000, with their decision to merge, Turner was ebullient, saying he voted his 100 million shares in favour of the merger.

The feeling would not last. Five months later, Turner was notified that he was stripped of his operating responsibility (previously he oversaw Time Warner's cable operations) as vice chairman. The slight incensed Turner and fuelled his animosity toward then-CEO Gerald Levin, who he publicly blamed for much of AOL Time Warner's problems. Levin abruptly resigned 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 step down, according to two sources close to the company. The wheels were in motion, and by early this month, Case resigned from his role as chairman, opening the door for CEO Parsons to take control.

Turner's announcement comes at a time when 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.