Slashdot Mirror
AOL-Time Warner's Money Pit
ElitusPrime writes: "There's an interesting analysis of the recently released balance sheet net worth of AOL Time Warner. The net worth of the largest media conglomerate on earth has now been slashed by more than one-third. The conclusion, not surprisingly, is that the merger never should have happened. But there's some interesting financial analysis to show exactly how bad the merger has been for Time Warner."
yet they hold three very popular programs amongst the slashdot crowd, AIM, ICQ, Winamp and support Mozilla. Should slashdotters really feel bad that AOL-TW is going down?
Slashdot Hypocrisy at work?
Hm... AOL/TW is just an experiment. Things can and do go wrong in experiments. Keeping personal opinions aside, (I hate AOL/TW's guts!), I think it's fortunate for all of the other smaller companies to have a chance. AOL/TW's not making as much money as it could be, in fact, it's losing money. Capitalism at its best (or worst, in AOL/TW's case).
Live or die trying.
I think they will make out like banditos!
:-)
Seriously, these kinds of cross-industry mergers are often appallingly inefficient for the first few years while all of the organizational kinks get worked out.
Then, when you start to see the synergies, they really take off, often out-competing all of the players from the industries the hybrid company was formed from.
In two years, when you see tightly branded Time Warner content (i.e. Bugs Bunny!) "Available Only On AOL!", with AOL billing you per-view on your ISP bill on your DCMA/CBDTPA-enabled home Entertainment Appliance, don't say you didn't have the chance to buy stock now
vkg
Hexayurt - open source refugee shelter,
These guys (Levin et al) live in a strata that most peons can't even comprehend. Imagine if you can, sitting there, seing on paper a massive payola for you personally if the deal goes through. Now... your task is to spin the deal to the shareholders so it looks like a great deal. Cha-ching.
The linked article is actually very poorly written, and highly specious in its analysis.
"Save for the monthly subscription revenue, there was nothing much to the AOL business to begin with, as the first mild downturn in the economy has convincingly shown, with advertising revenues from the service having now collapsed in a heap."
Actually, AOL was making quite a lot of money on advertising, and though the online ad market dove after the merger, that doesn't qualify the statement that there was nothing there to begin with.
The whole tone (mocking poetry writing, yapping about black holes, colloquialisms instead of actual business terms, and the overly familiar 'I-you-we banter' show this article to be a sensationalist 'I told you so (even though I didn't) editorial rant, and not an 'analysis' of any kind.
I'd love to find out where the money went, but the only thing this article taught me is that Fox's online news is the equivalant to WB's prime time news.
Kevin Fox
Yes AOLTW is getting slammed and their value is low, but so are many former high fliers. This guy doesn't provide any real insight into the situation. He's just flaiming AOL/TW.
And to me this just looks like merger pains. In ten years, maybe, we can begin to pass judgement on whether the deal was worthwhile.
Sweat
It breaks my pluginses, my precious!
They did an equity swap (as opposed to getting bond financing) which was a great move. JDS Uniphase could've bought, say, Boeing - but they didn't and now they're worthless.
No wonder the "original" TimeWarner people are pissed - they were had by a bunch of cowboys, and there wasn't a goddamn thing they could do about it at the time.
AOL, on the other hand, was smart enough to convert it's Internet hyped valuation into control over a company that would be worth something after the crash.
Does anyone else think that AOL pulled the biggest dotcom coup of all? Sure, thus far they haven't been able to do much with TimeWarner, but I do think they played their chips wisely while they still had 'em.
Steve Case, chairman of AOL is an investing genius. AOL stock was wildly overvalued at the time of the merger; the price would have tanked with our without the merger. Case used internet bubble speculation to buy Time Warner, converting soon-to-be-worthless paper into a valuable asset. Without the Time-Warner side of the company AOL would be worth a lot less today. (The Time-Warner side might be better off today without the merger, but it was definitely good for AOL shareholders.)
"Synergies": dot.com-speak for "We don't know what the hell we are going to do next".
Don't believe me? Look at Margaret Wente's commentary on BCE's chair resigning at the Globe and Mail, Michael Posner's comments on Vivendi's fall from grace, and perhaps most damagingly, a recent NYT comment (registration, blah blah).
One problem is that 'content driving distribution' ends up looking like trying to play monopoly (in general terms, not the board game), especially when the 'synergistic' entity restricts content competition on distribution channels. Remember the ABC cable fiasco from a couple of years ago, when they wouldn't let one channel show up on people's tv screens?
Another is not restricting access to avoid the public/governmental response outlined above: where's the 'synergy'? If there is no 'synergy', why bother?
AOL-TW is just the biggest failure, not the only one. And to be honest, the prospect of seeing this kind of 21st century 'new' mercantilism fail actually doesn't bother me a whit.
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Death will come, and will have your eyes
-- Pavese
Sorry, but Netscape had very little value in itself anyway, AOL just failed to see that fact. The company has historically been all about the hype, and that's why it's acquisitions fail. Time Warner is the one part of its operations that has value, and it still does.
Read jack phelps dot net
I strongly disagree. They won't set quotas so that the average user goes over it. They would be better served by rasing the monthly fee at that point. Instead, the quota will hit the average geek user who is using far more than the average amount of bandwidth. Joe Blow doesn't care if they limit the bandwidth to 3 GB a month, they don't use anywhere near that much in the first place.
Josh Winslow
Hmmm... we have all these multimedia folks talking about "synergies" - how stuff from one place will drive another will drive another and so on... for instance, the music division will feed the internet division, which in turn will enhance the television division...
Isn't this merely another form of the corporate conglomerate? And wasn't the concept of the conglomerate pretty much disproven by all these large corporations in the sixties and seventies experiencing difficulty in operating because no-one had the background, skill and knowledge set to properly run all of these divisions?
Viewed in that light, small wonder AOL-Time Warner ran into difficulty. The skill set needed to run AOL is fundamentally different from that of Time-Warner. Hell, I'm curious as to how efficient Time and Warner were together prior to AOL coming into the mix...
There will be a dramatic split-up or disinvestment coming in the future to AOL-Time Warner - it doesn't matter how they spin it. They need to get a central vision of what the business is and should be, and remove what doesn't fit into it.
The point that your missing is that things could have been worse for the two companies left alone. One big company might not be able to increase "organic growth", but might actually be able to survive. This sort of assumes that if there was no merger, things would go along rosily!
This is different, though. HP vs. Compaq is about two similar companies merging to reap the (perceived) benefits of increasing scale. AOL vs. TimeWarner, on the other hand, I've always felt to be about an overpriced dotcompany doing the smart thing and taking all that investor money to buy something that was actually worth something. Yahoo should've done the same thing and bought Disney back when they could.
News and bla for computer musicians: http://lomechanik.net/
Yeah, Winamp and ICQ have been abismal failures.
THIS SPACE FOR RENT
Did you know, for example, that AOL Time Warner, at latest tally, has nearly 13 million square feet of office space on its books?
So what? At 90,000 employees, that works out to an average of 162.5 square feet per employee, including conference rooms, hallways, cafeterias, bathrooms, etc. That doesn't sound like a whole lot to me.
1. Their home page. At the time of the purchase, AOL was dominant in the consumer market but had no handle on how to get access to the businesses. They saw the ability to drive significantly more advertising revenue by acquiring Netscape.com as they were the dominant business portal at that time. AOL closed deal after deal with major advertisers because of this.
2. Their browser. AOL hates Microsoft and really hates IE. Between 33% - 37% of their support costs were directly related to IE bugs. At the same time, they were forced to go with IE if they wanted that icon on the desktop of every new PC. By purchasing NSCP, they hoped to get the people and hard-earned know-how to put a competitive browser in play that directly integrated with not only the Internet, but AOL services.
3. Their servers. AOL was also looking at dumping their proprietary architecture and replacing it with a completely browser based solution. This, obviously, didn't pan out. But the thinking was they would have complete access to the best LDAP server, app server (performance and scalability wise), mail servers, and web servers on the market at that time.
The final piece of the puzzle was an agreement with Sun to dump the rest of the enterprise software (BuyerX, SellerX, ECX, etc) on Sun. This was done in simultaneously with a major hardware purchase from Sun ($500M?) with Sun purchasing a huge amount of advertising from AOL ($250M?). This agreement took two years to complete as U.S. tax law would have stuck AOL with a $250M bill if they divested those assets within the first two years of acquiring NSCP.
I, personally, didn't think it was a great deal. NSCP was on the way down and I thought AOL could have bought those assets at firesale prices 3 months later instead of the $4B they paid. Oh well, they made some of my good friends rich. :-)
Just say no to cool sigs,
gzo
The press release touts "Normalized EBIDTA" instead of net income, always a bad sign.
I have no idea what's really going on with this company. I doubt that anybody else on the outside does, either. There's too much "creative financing" involved.