Call Me Ted (47 page)
I left Australia following the closing ceremonies. As I made that long flight back to Atlanta I tried to rest, but wound up spending much of the flight reflecting on all that had happened over the past twenty months. I continued to be concerned, but on that evening of September 9, 2001, I tried to convince myself that things could only get better.
Stepping Away
O
n the morning of September 11, 2001, I was in my CNN Center office with my television tuned to CNN and the sound turned down. I was jet-lagged and tired after my flight home from Australia but I remember speaking briefly to my old friend NBA commissioner David Stern first thing that day. We had executives getting ready to fly to New York to meet with NBA representatives about a possible new rights agreement, and I wanted to check in with him before that meeting. Sometime after that call CNN began showing images of smoke coming out of one of the World Trade Center towers. The initial reports said it might have been a small plane accident. I was having trouble understanding how a crash like that could happen in downtown Manhattan when I saw on my monitor another plane go into the second tower and instantly thought, “We’re at war.” It felt like I was watching Pearl Harbor, live.
I immediately went downstairs to the CNN studios to offer what support and encouragement I could. At one point, I looked up at a monitor displaying Headline News and it was still running its usual loop of various news stories. I ran into Walter Isaacson—who had replaced Tom Johnson as CEO of CNN in July—and suggested he should put the regular CNN feed on Headline News as well. He agreed and the change was made minutes later. As tragic as those events were, it was gratifying once again to see CNN performing at such a high level at such a critical moment. But this was a different experience for me than our coverage of the Gulf War. I don’t know if any decisions were discussed that were similar to the ones we made to let our crews stay in Baghdad, but if they were, my input wasn’t requested. CNN didn’t report to me anymore and it was a strange feeling to be on the outside looking in at this company that I’d helped create. (Months later, when the U.S. war effort began in Afghanistan, I volunteered to go over as a military correspondent. I figured this would be another unique experience and without day-to-day responsibilities I could certainly spare the time. CNN management politely declined my offer.)
Jerry was in Europe on September 11 and was greatly affected by the day’s events. The tragedy brought back reminders of his son’s murder, and once he was able to fly back to New York, he returned to his job that much more adamant about AOL Time Warner making a difference. He was quoted referring to the company as a “ministry” and said that, post-9/11, our journalistic mission was more critical than ever. I had always been in favor of using the company’s media for the common good but the Time Warner mind-set seemed to be at odds with the culture at AOL. Not only had they never considered their company to be a journalistic enterprise, their primary focus had always been on growing the business and making their numbers. With the country moving into a recession, the company struggling, and the 9/11 tragedy so fresh in everyone’s minds, this was a tense and difficult time at AOL Time Warner.
After months of portraying our company as nearly invincible, in late September Jerry and Steve confessed to investors that they weren’t going to make the numbers for the third quarter. The market responded in a predictable way, driving the stock down to a new low of $30 per share.
As AOL Time Warner’s problems intensified, I felt like I was increasingly being kept at arm’s length. When I requested updates or reports on corporate issues, I rarely got what I asked for. I didn’t appreciate being treated this way. I might have been stripped of my operating role but I was still vice chairman, the largest individual shareholder, and a member of the board and I deserved to be kept in the loop. I continued with my years-old practice of being away from the office for days at a time. Earlier in my career, when I was delegating to trusted people who worked with me, this worked well; they did their jobs without daily interference and I would be out at one of my properties clearing my head and thinking about strategic issues. But now that I was no longer in charge, I think my absences worked against me as it became easier for Jerry to shut me out.
I tried a few times to discuss this with Steve Case but I got the feeling that he didn’t really know what was going on either. It seemed ironic that Case and I—the two founders of the company—were being ignored. The situation was unacceptable and something needed to be done.
A TED STORY
“Let’s Get a Meeting with Case”
—Taylor Glover
Both Ted and I had the perception that Jerry Levin had built a wall insulating Ted from the company and people on the inside were telling me that the same thing was happening to Steve Case. Given the fact that AOL had acquired Time Warner, you’d have thought that Case would have this monumental role but he really didn’t; Jerry still controlled everything. I suggested to Ted that we meet with Case to discuss our concerns with him and he agreed.
We set up a time to meet before the November 2001 board meeting in Dulles, Virginia. The plan was for me to go a half hour early and talk with Case privately about our perception of what was happening to Ted and to him. Ted would join us in progress, after I’d had a chance to lay this all out. Just prior to the meeting, I was surprised to learn that Steve was bringing his fellow “AOL” board members to the meeting, including Ken Novak and Miles Gilburne, but I decided to tell the entire group the same things I had planned to say to Steve privately.
I told them that in the first few weeks after the merger, Ted remained involved and informed—there was no wall around him. “Then a row of bricks went up,” I said. “Then another row was added, then another, and another, and pretty soon Ted couldn’t see over that wall anymore. He could try to jump and pull himself up to try to see over it but eventually it got too high.” I looked at Case and said, “Ted’s been totally shut out and we think the same thing is happening to you.”
My perception at the start of the meeting was that Steve looked very stiff and didn’t seem particularly interested. He was probably wondering why he was meeting with somebody like me in the first place. But as I described this situation he leaned forward in his chair and all but acknowledged that this was happening to him. He didn’t say it in words but his body language said, “Okay, we’re all in the same camp here,” and you could sense around the table a collective desire to go after Jerry.
The meeting was cordial and constructive but before we could get into any further discussion on our next steps Ted burst through the door and the tone changed immediately. Ted had a fire in his eyes like I’d never seen before and to my surprise he started screaming at Case. He said, “You don’t have any money in this damn deal! What are you worth, anyway? And what are
you
worth, Novak?” He instantly put everybody on the defensive but he made an important point. A lot of the people on the AOL side had cashed out a great deal of their stock while Ted had held on to his and was riding it into the ground.
The meeting didn’t go quite the way we had planned but it was productive. We helped Steve Case understand more clearly what was happening to him and to Ted. He and the other AOL directors also saw firsthand how irate Ted had become. If it came time to count noses around the table, Ted would be on their side. Case already controlled half the board. All he needed was Ted and one or two others and Jerry was history.
I knew that Taylor had planned for the meeting to go differently but the more I thought about the events of the prior two years the harder it was to contain myself. Getting fired was tough enough, and now I had to stand on the sidelines and watch the people who pushed me out run the company nearly into the ground. At this point, I realized I could no longer reserve all my anger for Jerry Levin. It was clear if AOL hadn’t merged with us, they would be in far worse shape. Instead, just prior to the dot-com bubble bursting, they acquired Time Warner with their inflated stock, effectively slowing their own descent while dragging us down with them in the process. I wasn’t happy and it was time for these guys to see it for themselves.
In the board meeting the next day I was more restrained, but when it was explained that our earnings were coming in well below the projections we had given Wall Street it was time for me to voice my disappointment to the full group of directors. Jerry was sitting right next to me and after trying to be supportive of him for so long I didn’t know if I’d have the courage to speak up, but I did.
“I’m not happy,” I said. The room got very quiet. “I’m not happy with these results and I’m very disappointed with the senior management of this company.” I got a little louder and more adamant as I went along, reminding my fellow directors that our stock price had been cut in half since that summer and saying that it was time that we as a board stepped up and did something about it. When I finished, no one else said a word. The meeting adjourned just a few minutes later.
No discussion followed my comments, but no one defended Jerry, either, and he must have realized that the handwriting was on the wall. In the following days he worked out a deal with Fay Vincent, a longtime director and head of the board’s governance committee. Jerry announced his resignation in December, explaining that he would officially leave the company in May of 2002. Dick Parsons would succeed him as CEO and Bob Pittman would be COO, marking one of the first times in the nearly two years since the deal was announced that a Time Warner person won out over someone from AOL for a key executive position. Steve Case would remain in his role as the company’s chairman.
Amid these transitions some people speculated that I might try to take over as the company’s chairman or CEO. I considered this briefly—along with just about every scenario I could think of to help the business—but returning to a management role simply wasn’t desirable. Running AOL Time Warner would have meant significant changes in my lifestyle. I’d have to move to New York and spending time at my properties would no longer be an option. I might have convinced myself to make these sacrifices if I thought I had the answers to the company’s problems but I didn’t. We had made a fundamentally bad move by merging with AOL, and I didn’t know how to turn the ship around any more than anybody else did. It was a relief to have Jerry gone and his replacement had the full support of the board. Dick Parsons is a good guy and the last thing he needed was Ted Turner going on some other quixotic adventure to try to regain power in the company. The best thing I could do now was to give Dick my support and hope that he could at least get things stabilized.
Dick moved quickly to assure Wall Street that he would be transparent and realistic when it came to reporting on the company’s performance. In March of 2002 he made it clear that our first quarter results would fall well short of projections and when these disappointing numbers were announced in late April, the stock dipped below $20. Realizing that my days of having a meaningful say at the company were over and with philanthropic and other commitments, I decided to start liquidating some stock. In May I sold 10 million shares of AOL at about $18.50 a share. This netted me almost $190 million and while it was a relief to pay off most of my bank debt, it hurt to know that just a year earlier these same shares were trading closer to $50.
The price kept falling as we headed into the summer and by early July it fell below $13. Then, just as things couldn’t get any worse,
The Washington Post
ran a story describing accounting irregularities on the AOL side of the company. The piece accused management of artificially inflating revenue numbers to meet the company’s aggressive sales targets. When analyzing dot-com companies, Wall Street focused almost entirely on revenue growth and keeping these numbers high was vital to maintaining a healthy stock price. The
Post
article accused AOL management of maneuvers that wouldn’t necessarily change the bottom line, but would present a misleading revenue picture. For example, they described AOL winning legal disputes with other companies and instead of taking cash as their settlement, they would “sell” them AOL advertising inventory of equivalent value. They’d then record this dollar amount as ad revenue, thus artificially boosting their top-line numbers.
Coincidentally or not, Bob Pittman resigned the day the story broke, and shortly thereafter, the Securities and Exchange Commission announced a full investigation of the company. On this news, the stock hit an all-time low of $8.70. It had been hard enough watching what I felt to be mismanagement of the company, but when I first heard of these allegations, my disappointment reached new levels. Throughout my career, I had run the company aggressively but I always demanded that we be honest. At Turner Broadcasting, we worked hard and overcame huge obstacles, but we always played by the rules. From my upbringing with my dad to the military schools I attended, honor and integrity were paramount with me. To be associated now with a company accused of dishonest behaviors left me disappointed and angry.
Meanwhile, over the past two and a half years my net worth had gone from nearly $10 billion down to about $2 billion. To put this in perspective, I lost nearly $8 billion in roughly thirty months. This means that, on average, my net worth dropped by about $67 million
per week,
or nearly $10 million
per day, every day,
for two and a half years. Losing that much money so quickly might have been a record, but it obviously wasn’t the kind I was hoping to set.
But what could I do about it? No one wants to sell at a low and when the stock fell below $9.00 it was hard to imagine things getting any worse. The company was being punished for not making its numbers and the SEC investigation hung over us like a cloud, but when you looked simply at the asset value of the Time Warner side of the company, the stock was clearly worth more than where it was currently trading. Wall Street realized this, too, and buyers slowly returned to the stock as we moved toward the end of the year, eventually heading back into the low teens.