AOL TW probe gloom looms
Company's shares drop on news story about probe
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The shares closed down 4.14% at $10.65 after falling 8% earlier in the session.
In a volatile market, investors were spooked by a report in the Washington Post that investigators are looking beyond the Netco's questioned accounting and into whether it helped advertising partners like Homestore and others cook their books as well as deals in which AOL may have inflated revenue figures for itself and other parties.
AOL Time Warner first acknowledged inquiries by the U.S. Dept. of Justice and the Securities and Exchange Commission last summer, and company reps reiterated Wednesday that the conglom is cooperating with investigators.
Little traction
People close to the company indicated this latest twist was part of an ongoing process of examining AOL's practices, not necessarily a widening of the probe. Yet with the inquiries still open and potential criminal or civil suits looming, the depressed stock can't seem to gain much traction -- even though many investors consider it undervalued. After all the time that has passed, said one fund manager, investigators "will find something. It's just a matter of what -- and how serious it is."
After an internal audit, AOL TW restated earnings by chopping $180 million off previously reported revenue from America Online, and Parsons said he didn't expect additional restatements.
Still, corporate scandals continue to grab headlines. The DOJ Wednesday arrested two Enron execs for fraud related to a deal with Blockbuster (see related story, page 9).
In an indications of Wall Street's jitters, Merrill Lynch analyst Jessica Reif Cohen said Wednesday she thinks "the longer the investigations linger on, the greater impact it may have on the Time Warner Cable IPO process, which remains a key component of the company's financial restructuring plan."
At a media conference last week, Parsons said the initial public offering was on a "glide path" for later this spring or summer, market conditions permitting.
