AOL Time Warner: A Merger Gone Wrong
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ICMR HOME | Case Studies Collection
Case Details:
Case Code : BSTR047
Case Length : 19 Pages
Period : 2000 - 2003
Organization : AOL Time Warner
Pub Date : 2003
Teaching Note :Not Available
Countries : USA
Industry : Media, Internet and Entertainment
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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An Unceremonious Departure Contd...
My case, it is about putting the company's interests first. This company cannot afford any distractions. There are a lot of challenges we face. We need to focus on those, not some debate about Steve Case." However, as the company's financial situation worsened, Case had no choice but to resign. With his departure, not a single top-executive was left on the AOL Time Warner board, who had actually taken part in executing the merger agreement in 2001. Declining share prices, reduced profitability, accusations of financial irregularities and customer unrest - all these had made one of the largest mergers ever in the history of the global corporate world look like a big mistake.
Background Note
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America Online (AOL)
In the early 1980s, Case felt there was a latent market for user friendly online services. The online services provided at that time were very complex and costly and provided poor quality content. Believing that the online service market would evolve into a big industry in future, Case, Jim Kimsey and Marc Seriff founded AOL in 1985. The company was initially incorporated as Quantum Computer Services (Quantum). Quantum provided online services to consumers via PC modems. Quantum's first product was 'Q-Link,' a proprietary online service that routed emails and chat through its communication network (via telephone cables). Q-Link became popular in the market, and within a year its user base crossed the 10,000 mark.
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In October 1989, the company launched a private online service for all computer users in the US. The new service, identified by a blue triangle with a swirl in the center (the company's logo), offered games, e-mail, chat, news and travel information. In 1991, Quantum was renamed America Online and Case was appointed CEO of the company.
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The total customer base of the company during that period was 150,000, with total revenues amounting to $ 20 million. During the 1990s, AOL acquired Compuserve, Netscape and the ICQ brand. These acquisitions helped it establish itself as a global online service provider.4 During the same, AOL entered the e-commerce solutions market through an alliance with Sun Microsystems. AOL also offered services in over 17 countries and in eight languages. The AOL International Group operated mainly through joint ventures and distribution arrangements. Major countries in which AOL operated included Australia, Austria, Canada, France, Japan, Germany, Sweden, Switzerland, Netherlands and the United Kingdom. |
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