Aol Time Warner Analysis Term Paper

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COMPANY OVERVIEW

OWNERSHIP STRUCTURE

Time Warner- America On-Line's ownership

structure consists of the Board of Directors,

Senior Corporate Executives, and Senior Corporate

Officers. It is the largest Internet company in

the world. America-On Line aims to shape the

Internet Age through providing outstanding

services as a provider, partner, and a corporate

citizen. The company believes that social

responsibility is a very integral part of their

mission. They aim to provide the highest quality

products and services and to act with integrity,

and contribute to the common good. The company's

corporate life and culture stresses on promoting

an ethic of volunteerism and civic engagement.

MISSION:

To become the world's most respected and valued

company by connecting, informing, and entertaining

people everywhere in innovative ways that will

enrich their lives.

VALUES:

The company stresses on the following values:

creativity, customer focus, agility, teamwork,

integrity, diversity, and responsibility.

AOL TIME WARNER'S OTHER BUSINESSES:

In order to maximize the value of the company's

combination of brands and other assets and to push

forward future growth that will revolutionize the

media and communications industry, their main

focus lies in subscription services, advertising

and commerce, and content.

Interactive Services and Properties: AOL

Networks: Turner Broadcasting

Home Box office

Publishing: Time Inc.

Time Warner Trade Publishing

Filmed Entertainment: Warner Bros.

New Line Cinema

Music: Warner Music Group

Cable Systems: Time Warner Cable

FINANCIAL INFORMATION

Following its $106.2 Billion merger with

Entertainment giant Time Warner, AOL managed to

fight off the first-quarter blues that impacted

nearly every other Internet company and posted

positive numbers. During the first quarter of

2001, AOL soared from $1.81 Billion to $ 2.12

Billion as ad and commerce revenue rose 37%

totalling $731Million.

Financial analysts were proven wrong when

revenues rose 9% from $8.32 Billion to $9.08

Billion. Analysts attributed the gains to some of

AOL's cross-promotional activity with Time Warner

as well as its marketing might. In terms of

on-line advertising shares AOL controls 45% of the

total market.

Bob Pittman, the Chief Operating Officer of AOL

forecasts sales of $40 Billion this year, a 12%

increase over 2000 and $11 Billion before taxes in

earnings. Therefore increasing earnings 30% over

last year.

Though their stock has fallen from $69 last May

to $35 at present, the number of subscribers

continue to rise. In fact, AOL brings more than 31

Million total subscribers globally. The Company\'s

reported net loss, including merger-related

expenses and pre-tax non-cash charges of $620

million reflecting the write-down of certain

investments in the AOL Time Warner investment

portfolio, was $1.4 billion, or $0.31 per share.

On the same basis in the year-ago quarter, the

Company\'s reported net loss, including one-time

events, was $1.5 billion, or $0.34 per share.

In addition, the quarter\'s specific highlights

include:

* Subscriptions: AOL Time Warner\'s total

subscriptions grew to more than 133 million, a

nearly 16% increase during the year. In the

quarter, the flagship AOL service alone added more

than 2 million new members for a total of 28.8

million.

* Advertising and Commerce: Strong growth in

advertising and commerce revenues were led by

year-over-year increases of 37% at America Online

and 17% at Time Warner Cable.

* Share Repurchase Program: The Company

repurchased 14.1 million shares of its common

stock at a cost of $615 million, as part of its

previously announced program to repurchase up to

$5 billion over the next two years.

The schedules below reflect AOL Time Warner\'s

performance for the March quarter (in millions):

CONTACTS:

Edward Adler Tricia Primrose

Corporate Communications Corporate Communications

(212) 484-6630 (212) 484-7450

Richard Hanlon Eileen Naughton

Investor Relations Investor Relations

(703) 265-1271 (212) 484-7640

PUBLIC RELATIONS EFFORTS

AOL Time Warner believes that developing media

and communications policies are essential in the

Internet Century. The following are the company's

position on specific issues of public policy:

Education and the 21st Century Literacy Issues:

AOL Time Warner believes that public policy must

reflect the changing landscape of education and

the changing needs of young people entering

today\'s job market. The AOL Time Warner

Foundation is committed to making technology,

education and 21st century literacy public policy

priorities at the federal, state and local level.

Closing the Digital Divide:

AOL Time Warner supports a wide range of

initiatives designed to develop the information

infrastructure, provide better education and

awareness, and bolster community-based projects

around the world. The company is committed to

working with lawmakers and advocates to encourage

a policy and regulatory environment that fosters

widespread access to information and

communications technology in the U.S. and abroad.

Privacy, Security, and Consumer Protection:

AOL Time Warner has established the strongest

consumer protection and privacy standards in the

industry. Their commitment to ensuring children\'s

online privacy and security is a centerpiece of

the public policy agenda: from putting in place

special parental controls that help parents guide

their children\'s online experience, to working

within the industry to increase public awareness,

provide families with valuable new tools and

resources for the Information Age, and teach young

people what they need to know to have a safe,

enriching experience in cyberspace.

AOL Time Warner is committed to helping establish

industry-wide standards that benefit the

development of the online medium and consumers.

Consumer Choice of Internet Service Providers:

The coming of broadband technology is

turbo-charging media and communications "” and

benefiting consumers in innovative new ways. AOL

Time Warner\'s multi-year investment in fiber optic

and digital technology already enables more than

12 million consumers around the country to receive

more and better video programming, enhanced

picture and sound quality, improved signal

reliability and advanced communications products

and services. They are committed to working within

the industry and with lawmakers to promote

market-driven policies that encourage the

continuation of this robust and innovative

environment for new digital services and expanded

consumer choice.

The First Amendment:

The First Amendment also protects freedom of

expression "” and AOL Time Warner is committed to

fostering human imagination and creativity. And

the company will continue to oppose efforts to

censor, intimidate or chill the freedom to express

what is in our hearts and minds.

Since the first Internet content debate in 1995

concerning the Communications Decency Act, efforts

to regulate Internet content "” from sex to

gambling to advertising and other content "” have

continued apace. AOL Time Warner has long been an

advocate of putting those decisions "” through

technology "” in the hands of consumers.

Responsible Guidance on Entertainment:

AOL Time Warner is dedicated to providing

world-class entertainment, both online and off.

Across all of our businesses, our company takes

our responsibility to consumers seriously "”

providing them with the guidance they need to make

informed decisions for themselves and their

families.

Intellectual Property:

AOL Time Warner supports strong protection of

intellectual property rights, both online and off.

They have a long history of supporting efforts to

combat piracy of videocassettes, CDs, books and

more. Enforcement of existing law, development of

protective technology and new business plans to

make these works available to everyone in every

format, on every device, and over every medium,

regardless of ownership, are of high importance to

their strategy on intellectual property

protection.

At the same time, AOL Time Warner believes that

liability rules for infringing material and other

illegal content should never unnecessarily impede

innovation.

International Telecommunications Issues:

AOL Time Warner is working to eliminate outmoded

barriers to trade and impediments to the free flow

of information caused by legacy telecommunications

systems, while respecting existing frameworks and

cultural differences, and strengthening their

global commitment to protect consumers and

children. In addition, the company is working

toward privatization and liberalization of

national telecommunications and communications

marketplaces, so the Internet is affordable for

the greatest number of people.

Trade and E-Commerce:

AOL Time Warner is actively working to persuade

WTO members to commit to opening their markets in

sectors critical to initiating and completing an

e-commerce transaction. In addition, AOL Time

Warner believes that Internet-based electronic

transmissions should not be subject to tariffs or

any customs duties, and that national regulations

affecting e-commerce should be non-discriminatory,

transparent and the least restrictive of trade as

possible.

Postal Rates:

In an environment where US Postal Service volume "”

especially in First Class, which serves so many

businesses "” could decline from electronic

competition, AOL Time Warner is working with all

other stakeholders in the system to develop

innovative and forward-looking policies that help

to maintain a Postal Service that the public

expects and business needs to thrive in the 21st

Century.

AOL Time Warner Foundation and Corporate

Citizenship

AOL Time Warner hopes to utilise the Foundation

to set higher standards for corporate citizenship.

The company aims to combine its communications,

media and information technology strengths to

educate, inform and inspire people around the

world.

The AOL Time Warner Foundation believes the areas

where it can impact the most are Equipping Kids

for a Better Future, Extending Internet Benefits

to All, Engaging Communities in the Arts, and

Empowering Citizens & Civic Participation.

CRISIS AREAS

The main crisis area for AOL Time Warner lies

primarily within the merger of the two companies.

The merger began in 1999 and was not complete

until 2000. The merger was a success, even though

the company as a whole took minor stock price and

profit losses. The combination, however, has

allowed them to combine their vast media,

communications, and information technologies to

create a communications giant.

Immediately following the initial releases

concerning the merger many critics surfaced. The

accusation was that AOL and Time Warner were

forming a monopoly and the FTC should not allow it

to take place. They made it past these

accusations by implementing massive

community-oriented efforts, labelled as the AOL

Time Warner Public Policy.

Other areas of stress for the two newly combined

companies include Broadband and Expansion

concerns. After leading the campaign to force

AT&T to allow open access to high-speed networks,

AOL feared that AT&T would not give them access to

these new high-speed technologies. Currently

though, AT&T holds a large stake in Time Warner

Entertainment and, therefore, has allowed AOL

access. Just in case this does not last AOL has

been investing in other means of delivering

broadband services (such as conventional telephone

lines and satellite television. Without telephone

company co-operation, AOL Time Warner cannot

expand easily into other countries. Charges are

not uniform and th

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