Wild ride on Street for AOL

Stock sways as successor talk begins

By JILL GOLDSMITH

Case

NEW YORK -- The resignation over the weekend of AOL Time Warner chair Steve Case gave the stock a modest boost Monday. But an upbeat response to his exit news was tempered by suspicions of its timing.

Shares surged, then backtracked, ending the day up about 1% at $15.03.

AOL TW's board meets Thursday, and the company issues 2002 financial results Jan. 29. Wall Streeters haven't forgotten that Bob Pittman ankled last summer shortly before the company revealed a Dept. of Justice probe of America Online's accounting practices. CEO Richard Parsons stunned investors with the news during a conference call to discuss the conglom's quarterly financials.

That inquiry, and another by the Securities and Exchange Commission, are pending -- and keeping a lid on the stock.

"We wonder whether the resignation is linked at all to a wrap-up (and a fall guy?) for the SEC/DOJ investigations," Prudential Securities analyst Katherine Styponias wrote in a note to clients Monday morning.

Case's departure is more likely linked to AOL TW's late-March deadline to file a proxy statement ahead of its annual shareholders' meeting in May. In the proxy, AOL will submit directors and top management to a stockholder vote.

With Case out, talk focused on a successor, with a spokesman noting that the board will address that issue "in due course." Gossip swirled about a higher-profile role for board member Ted Turner or for Liberty Media's John Malone -- both long shots for the top job -- or a dual chairman-CEO role for Parsons. However, if Parsons does assume the chairman title, many Wall Streeters said they'd prefer that he appoint a hard-hitting CEO to run the day-to-day operations.

The company is expected to make a decision by May.

Case told Fox's Neal Cavuto: "I'll support whatever the full board supports. I won't speculate on particular individuals."

Case's exit also sparked a new round of speculation in some quarters that AOL TW could be snapped up by another giant conglom like GE or a competitor like News Corp. However, people close to the company consider such action highly unlikely.

CNN execs confirmed Monday that CNN's merger talks with ABC could resume in about six weeks, once the CNN team completes an evaluation of the combo. They made the comment while speaking to reporters about the exit of CNN chief Walter Isaacson.

Isaacson said his departure was "totally unrelated" to Case's. But the news made some investors uncomfortable. Although they wanted Case out, they're generally looking for stability in AOL TW's top management after a period of rapid turnover.