AOL's Steve Case: Break Up Time Warner

Steve Case, the co-founder of AOL and one of the main architects of the disastrous AOL-Time Warner combination, now says the world's biggest media company should be broken up into four business units.

Case, who became a lightning rod for angry investors following the debacle, laid out his argument for breaking up Time Warner Inc. (TWX) in an essay published in The Washington Post on Sunday.

Case said he presented his proposals to Time Warner's board in July, saying that efforts to date to integrate the various business units of the company had not succeeded. He said the company would be better off as four separate units: AOL; an entertainment company; the magazine publisher Time Inc.; and Time Warner Cable.

Case resigned from Time Warner's board in October, and relinquished his role as chairman two years ago, although he still owns about 0.4 percent of the company's stock. Many other senior executives from AOL have already departed, and Time Warner has changed its name from AOL Time Warner Inc. to just Time Warner Inc.

Time Warner's agreement to be bought by AOL at the height of the Internet bubble in early 2000 resulted in years of turmoil, including shareholder lawsuits, regulatory investigations into AOL's accounting practices, a plunge in the company's share price and a management purge.

Time Warner is now on a much more solid footing with investors, and AOL's fortunes are on the upswing thanks to its recent strategy of shifting to an advertising-driven business instead of providing Internet access. Time Warner is holding exploratory talks with several companies including Microsoft Corp. (MSFT) about some kind of deal to accelerate AOL's growth.

Case said in October that he was leaving Time Warner's board to focus on his new investments and to avoid any potential conflicts of interest. Case's investment company Revolution LLC owns several businesses including a maker of yoga, acupuncture and other health-oriented TV programs; a high-end spa outside Tucson, Ariz., called Miraval, and Exclusive Resorts, a company that markets luxury vacation rentals.

Case said in the essay that he had not consulted with Carl Icahn, the billionaire financier who is also agitating for change at Time Warner, including a major share buyback and a spinoff of Time Warner Cable. Time Warner currently plans a 16 percent spinoff of its cable unit, and a smaller share buyback than Icahn wants.

Time Warner said in a statement that while it respected Case's views as a shareholder, it had already considered his proposals and decided against them.

"We respect Steve's views as a shareholder. As Steve is aware, these views have been carefully considered by Time Warner's board and management, together with outside advisers, and we have concluded that there is no evidence that the steps he has proposed will improve shareholder value," the company said.

Time Warner's shares, which are still about 75 percent below their level prior to the AOL deal, showed no reaction to Case's proposals, edging up 1 cent to $17.67 in morning trading on the New York Stock Exchange.

A representative for Case did not return a call seeking comment.