His comments come at a time of reported partnership negotiations between AOL and Microsoft and Google.
Although I played a key role in bringing AOL and Time Warner together six years ago, it’s now my view that it would be best to ‘undo’ the merger by splitting Time Warner into several independent companies and allowing AOL to set off on its own path, Case wrote in a lengthy piece published by The Washington Post on the weekend.
Case said the merger of the century quickly became the worst merger in history.
Among the merger’s failures, Time Warner’s cable systems and content has failed to speed up AOL’s transition from phone dial-up to broadband, as expected, he said.
Some benefits that AOL expected – such as replacing Road Runner, Time Warner’s broadband cable service – did not materialize, Case wrote. Meanwhile, unexpected roadblocks – such as internal pressures slowing AOL’s efforts to make Internet telephone service commercially available – unfortunately did.
He said Time Warner has weighed AOL down, while its competitors, such as Google and Yahoo, have made important strides forward.
Case has a more than $250m personal stake in the company, as one of its largest individual shareholders. But he claimed to also have a particular passion about the future of AOL, being one of its co-founders.
He said Time Warner might sell a minority stake in AOL to generate cash. Or perhaps it will split AOL into different content portions and sell a stake in just one part, Case said. The smaller but growing content portion sells online ads; the highly profitable but shrinking access portion sells monthly memberships for the service, he wrote.
Perhaps it will use AOL to form a new joint venture with Microsoft to try to compete with Google, he wrote.
But each of these options would be a mistake, Case said. AOL needs to become an independent company without being slowed by bureaucracy or stymied by sister divisions, he wrote. A free-standing AOL could reinvest its more than $1bn annual free cash flow, which is now divested to other Time Warner operations.
He said AOL was the best position company to become the preeminent Internet-based phone company of the 21st century, thanks to its nearly 100 million instant messaging users.
While AOL is now at long last getting a VoIP service to market, the company suffers anxiety about conflicts with Time Warner Cable, which offers competing services, Case said.
He also sees social networking and vertical Web ports as keys niche markets for a stand-alone AOL.
Case said the intended one company strategy for the AOL-Time Warner merger never got off the ground. Instead, each division ‘did its own thing.’ While that staved off turf wars, it did nothing to drive innovation, he wrote. As a result, the company’s growth has slowed, and the stock is now trading at about half what it was four years ago.
