CNBC had former AOL CEO Steve Case as guest host this morning for several hours. As his guest, Case invited his former co-CEO, TimeWarner’sGerald Levin, to appear and discuss the merger which is now generally regarded as the worst of that decade, or the past ten years, if it’s not a formally-demarcated decade.
from The Reasoned Sceptic January 4th, 2010 blog post Gerald Levin & Steve Case on CNBC This Morning: TimeWarner-AOL Merger Failure
The closing paragraph from my previous post on Nortel’s former CEO John Roth made the observation that, “Unlike the true captains of industry who persevered through the inevitable trials and setbacks to plant their flag on the pinnacle of corporate achievement, the smarmy likes of Roth and the others like him grabbed what they could when they could realizing that their abilities and resulting accomplishments had a limited shelf life.” Emphasis on the limited ability and shelf life reference.
The distinguishing difference between Roth’s clandestine grab for cash on his way out and the actions of Steve Case, whose informercial talk show turn with former partner in incompetence Gerald Levin courtesy of CNBC, demonstrated more chustzpa than actual brains, confirmed that as opposed to avarice neither actually had what it took to create a sustainable enterprise. Or to put it another way, while Roth, in an effort to cover up his executive shortcomings, enrichingly jettisoned himself from a the equivalent of the business world’s Titanic just before it struck the iceberg, the authors of what has been called the worst merger of the decade if not all time (at least in the top 10 anyway) openly demonstrated their shortcomings with the deal-making acknowledgement that AOL couldn’t make a go of it alone.
Similar to the old uncle that gets passed around from one family member to the next, this “proud” AOL tradition continues to this day with current CEO Tim Armstrong’s efforts to push the sale of the company to Yahoo.
Given Yahoo’s suggested ambivalence towards AOL by way of a comment in a Reuters article by Nadia Damouni and Jennifer Saba, one has to wonder what is wrong with the Internet services and media company?
According to Damouni and Saba, despite the fact that Yahoo’s own strategic review has bumped AOL to the back burner for many on Wall Street the Internet company’s intrepid CEO is, still trying to drum up shareholder support for a deal with Yahoo, presenting it as an alternative to going it alone as an Internet media company.
So what’s wrong with going it alone? Of greater interest is why AOL, even during the dot.com boom, never felt it had the footing to independently carve out its niche in what was granted a volatile yet promising market?
In what I can only describe as being a chicken or an egg scenario, is this reluctance to embrace independence a reflection of the individuals at the helm (i.e. Steve Case and now Tim Armstrong), or an indigenous corporate culture that defines its leadership (or lack thereof)?
From a personal perspective I can only consider my motivations for selling my software company, which was to address two critical imperatives . . . the first was the desire to build an even bigger enterprise, and the second was to secure additional funding to help offset the costs of a development program that had run over budget. Remind me to tell you the story of EDS and their infamous ability to pad costs in the face of a diminishing deliverable capability.
While highly profitable – our GP on $3 million in sales was as much as $1.9 million, mine was nonetheless a boutique or speciality business that was originally built around the needs of a single, large customer. Even though I was flush with cash, the reliance on a single client created a sense of urgency relative to scalability. This meant that I had to develop a means of improving the company’s ability to add new clients in an effort to mitigate the obvious risks associated with our increasing dependence on the market fortunes of a sole entity. My solution was to seek a partner by way of acquisition.
Even though the budget overruns added an unwanted distraction to the negotiation process, it ultimately proved to be of little consequence given the benefits of our steady and certain cash flow. This meant that seeking a partner presented a far less daunting task than what AOL is now facing given what has been called surprising losses in the most recent quarter and the corresponding 31% drop in share value.
Against such a negative backdrop the prospects for AOL’s long-term survival is bleak. Think of it in the same light as someone attempting to sell you the Titanic after it struck the iceberg.
This brings us back full circle to AOL founder and CEO Steve Case.
The fact that it has taken AOL this long to reach the precipice of oblivion in no way mitigates the fact that Case failed to establish a sustainable business model.
The fact that he chose to partner with Time Warner’s Levin, who CNBC named as one of the “Worst American CEOs of All Time,” (hmmmm the similarities between Levin and the CEO of the public corporation that acquired my company Gary Economo, is scary), is as much a reflection on his executive abilities as my selection of a suitor is on mine. The only difference between Case’s AOL and my company is that after the acquisition hungry Dynasty Components failed due to several strategic and financial miscues on the part of Economo, I was able to take back my firm and enjoy another couple of years of relative prosperity.
In the end, it is the absence of this level of commitment and resilience that will ultimately prove to be the undoing of what was once considered to be the consumer and even business gateway to the Internet and all it had to offer.
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