Aol Time Warner Case Analysis

Case Issues

1. Top Management- How will having a new CEO and CFO affect Time Warner?

2. Financial Position- AOL is putting a strain on Time Warner's Financials.

3. Human Resources- How will the Writers Guild Strike affect Time Warner?

I. Current Situation

Time Warner Inc. is a leader in the media and entertainment industry. Its businesses include interactive services, cable systems, film entertainment, television networks and publishing. Its individual businesses are AOL, Time Warner Cable, HBO, Turner Broadcasting System, New Line Cinema, Warner Bros Entertainment, and Time, Inc.

A. Current Performance

Last year Time Warner, Inc delivered an impressive year. In 2006 Time Warner generated $44.224 billion which is an increase of 4% from 2005.Their operating income in 2006 before Depreciation and Amortization was $10.941 billion, a 54% increase from 2005. They had an operating Income of $7.362 billion up 85% from 2005. Time Warner's net income was $6.552 billion a 145% increase from 2005. Cash provided by operations was $8.598 billion a 76% increase from2 005. The results for 2006 and 2005 reflect the effects of pretax charges of $650 million and $3 billion, respectively, related to securities litigation as discussed further in "Recent Developments."

B. Strategic Posture

Mission:

* "We thrive on innovation and originality, encouraging risk-taking and divergent voices."

* "We value our customers, putting their needs and interests at the center of everything we do."

* "We move quickly, embracing change and seizing new opportunities."

* "We treat one another with respect--creating value by working together within and across our businesses."

* "We rigorously uphold editorial independence and artistic expression, earning the trust of our readers, viewers, listeners, members and subscribers."

* "We attract and develop the world's best talent, seeking to include the broadest range of people and perspectives."

* "We work to improve our communities, taking pride in serving the public interest as well as the interests of our shareholders."

Objectives:

* Diversity is one of Time Warner's major objectives. They believe that this gives them a competitive edge because they believe that success depends on "creating, producing, and distributing products and services that are of compelling interest to the broadest audiences and markets."

Strategies:

* Time Warner's first strategic goals are making sure that they are in the right businesses. This means that they will direct their investments to their most competitively well-positioned companies, which also have attractive growth prospects and fit well with their other operations.

* A second strategic goal is to keep running their businesses at the highest level possible; this includes cross-company collaborations, to extend their leading competitive positions. For Time Warner, Inc. this means that they start with meeting and exceeding their annual financial objectives.

* Another important strategic priority for Time Warner's businesses' future success is making the most of the growing digital opportunities.

* Time Warner is committed to managing their finances to grow their businesses and deliver value directly to their shareholders.

Policies:

* The protection of intellectual property

* The advocacy of a fair and competitive communications environment

* High standards of business conduct

* Operate in an ethical and responsible manner

* The promotion of effective tools for online safety

* Data security and consumer privacy

* The defense of journalistic freedom and integrity

* The development of a fair global trade

* Nondiscriminatory taxation of our businesses

II. Corporate Governance:

Time Warner's Board of Directors consists of 13 members and has three separate committees. These committees are the Audit and Finance Committee, the Compensation and Human Development Committee, and the Nominating and Governance Committee. Each committee is composed entirely of independent Directors. Time Warner Inc. commits to having strong corporate governance practices that allocate rights and responsibilities among the company's stockholders, their board of Directors and management.

A. Board of Directors

1. Richard D. Parsons: Chairman of the Board and CEO, Time Warner Inc.

* became CEO in May 2002 and chairman of the board in May 2003

* In its January 2005 report on America's Best CEOs, Institutional Investor magazine named Mr. Parsons the top CEO in the entertainment industry.

* Mr. Parsons joined Time Warner as its President in February 1995, and has been a member of the company's Board of Directors since January 1991.

2. James L. Barksdale: Chairman and President of Barksdale Management Corporation. (Member of Nominating and Governance Committee)

* Previously served as President and CEO, Netscape Communications Corp. - 1995 to 1999 (when it was acquired by America Online).

* He is an Independent Director. He was a Director of America Online from March 1999 until the AOL Time Warner Merger in January 2001, and has been a Director of the Company since that date.

3. Jeffrey L. Bewkes: President and Chief Operating Officer (COO), Time Warner

* Named president and chief operating officer of Time Warner Inc. in December 2005 and was elected to the company's Board of Directors in January 2007.

* Mr. Bewkes was chairman of Time Warner's entertainment and networks group from 2002.

4. Jessica