Steve Case - The Story of AOL's Architect

            
 
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Case Details:

Case Code : LDEN017
Case Length : 14 Pages
Period : 1992-2002
Pub Date : 2002
Teaching Note :Not Available
Organization : AOL TW
Industry : Media and Entertainment Countries : USA

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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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Steve Case: Guilty or a Scapegoat? Contd...

In July 2002, AOL TW also faced an SEC probe due to allegations of accounting improprieties at AOL in the months preceding the merger. All the above problems resulted in a fall in the company's share price during mid-2001 and late 2002 (in December 2002, AOL TW's share price closed at $13.54 as against $48 on the day of merger).

In late 2002, analysts stated that if the AOL division were to be taken out of the account, the TW divisions by themselves would generate 10 times of the AOL TW's estimated earnings for 2003 (Refer Exhibits III, IV & V for financials and share price movements of AOL before and after the merger). Media reports the world over blamed Case for most of AOL TW's problems.

Leadership and Entrepreneurship Case Studies | Case Study in Management, Operations, Strategies, Leadership and Entrepreneurship, Case Studies

The shareholders of the company held him responsible for the steep decline in the share price and the company's profitability after the merger. Reportedly, the top brass of TW also accused Case of forcing the loss making AOL onto the profit making TW and reducing the latter's profitability. Some TW employees even compared AOL with cancer, which was eroding the value of their stock options.3 

The fact that Case sold a major part of his AOL stock soon after the merger was announced in January 2000 (when the price of the stock was high) and made an estimated profit of $160 million evoked suspicion and anger among shareholders. They thought that Case was aware of the fate of the merger and accused him of making money when the time was right, at the expense of the shareholders. After the merger, a shareholder of the company commented, "There is no shareholder in the company of any substance that wants him around. There is nobody at TW that wants him around. I do not think the majority of the board wants him around. So his only constituency is the AOL board members. That is all that stands between him and the door".

It was also reported that a few shareholders of the company (including the largest shareholder of AOL TW, Ted Turner) planned to demand Case's dismissal at the company's AGM scheduled to be held in May 2003. Despite such reports, Case had remained silent, which, analysts remarked, was his usual answer to any kind of criticism directed against him...

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3]  BusinessWeek, August 5, 2002.

 

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