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AOL's Big Blowout March
2000
AOL Time Warner posts largest ever US corporate loss
at $99 billion
It was meant to be the ultimate synergy between old media
content and new media entrepreneurship. In two years, however, the high-flying
enterprise created by the world's largest media enterprise has crashed
back to earth with losses for 2002 posted at $98.7 billion, although revenues
had also increased by eight percent for the fourth quarter of the year.
At a press conference in January, AOL Time Warner surprised
shareholders by announcing a larger than expected loss, at $45.5 billion,
which brought the total for last year to nearly $100 billion, the largest
ever loss posted by a US corporation. Most of the loss came from the fact
that the company had written down the value of its AOL Internet division
by $35 billion, with another $10 billion loss due to its cable division.
The heady promises made in preparation for the merger
of AOL and Time Warner at the end of the nineties quickly unravelled as
dotcom boom turned to dotcom disaster, and from a height of $71 per share
after the announcement of the merger in January 2000 the company fell
to its lowest value of $8.70 last July. After news of the huge losses,
shares fell by 14 percent to $12.
Investors in AOL Time Warner were concerned that its
Internet division, in the words of one strategist, did not simply 'become
a source of losses', and there was concern at how many of AOL's 27 million
customers were converting to broadband subscriptions.
| Ted Turner
had been among the strongest critics of the merger when it took
place and announced that he would be stepping down as Vice Chairman
of the company. There had been rumoured difficulties with AOL's
Steve Case, and in a prepared statement he informed investors that,
'After much reflection, I have decided to resign from my executive
duties as vice chairman of AOL Time Warner. 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.'
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