The Download Live: AOL's Steve Case Resigns
With Shannon Henry
Washington Post Staff Writer
Thursday, Jan. 16, 2003, Noon ET
AOL Chairman Steve Case resigned under pressure as founder and chairman of AOL Time Warner Inc. The resignation will be effective in May.
Post reporter and The Download columnist Shannon Henry was online to take questions about Case's resignation and the future of America Online.
In her recently published book, "The Dinner Club," Shannon Henry wrote about Case and a small group of Washington-area technology entrepreneurs who gathered together to fund innovative companies in the region. She has closely followed Case's career for a number of years and shared her insights online.
Henry has been covering the local technology scene since 1995, documenting the successes and failures of local tech companies, and the culture and ideas of local business personalities. Her column appears on Thursdays in the Business section of the newspaper, and she regularly hosts The Download Live on TechNews.com, The Washington Post Web site dedicated to covering technology news. Her book "The Dinner Club" is published by The Free Press.
An edited transcript follows.
Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.
Arlington, Va.: Does anybody really care that Steve Case is leaving AOL? He's been dead wood over there for a while, hasn't he?
Shannon Henry: Hello! Thanks for joining the chat today.
Of course much of the world doesn't care about Steve Case leaving AOL...but we in technology journalism do. And so, apparently, do AOL Time Warner workers, investors, and users of the AOL service. But the move was largely symbolic. For some time Case has been head visionary as chairman, that is not running the company day-to-day.
Dupont Circle: Why is it that people like Steve Case can't just ride off into the sunset? He's already traded his first wife in on his former marketing guru, Jean. He has about a billion dollars. He rode the wave and some would say, crashed. He's on the outs with investors and insiders. It's time for him to go. Why is it that these guys don't just do a Walter Cronkite and fade away?
Shannon Henry: Sure, many people would have been out a long time ago. Why isn't Case just enjoying that beach on Kauai he owns? Part of it's financial. Even though he has more money that most of us can even imagine, he still has a huge personal financial interest in making AOL Time Warner work. But more importantly, people like Case aren't satisfied just sitting back and watching the world go by. It's a sort of achievement angst, a need to constantly prove oneself. That's why I think we haven't seen the last of him.
McLean, Va.: Shannon,
I enjoyed "The Dinner Club." Nice to learn about the local movers-n-shakers.
Do you know of any good web resources to learn about other angel investors in the area and/or the inside scoop on the local VCs?
Shannon Henry: Hey, thanks. You should check out the Mid-Atlantic Venture Capital Association's web site at www.mava.org or the National Venture Capital Association, which is www.nvca.org.
Bethesda, Md.: If you had to guess, what do you estimate Michael Saylor's current fortune to be? How much of a loss has he seen from the downturn? He had a secondary offering in the works about the time the accounting scandal broke. Did that ever happen?
He comes off like a savant. Reminds me of the "Rain Man" character. So intelligent but so clueless in the ways of every day life. And, he has the smallest hands I've ever seen.
Shannon Henry: Last I checked much of Saylor's fortune was still tied to his company, MicroStrategy. He was once a billionaire but is now a mere multi-millionaire. I hear he's living in Georgetown these days and is out and about on the party circuit, though laying low professionally. The secondary offering was pulled, but the company did do a private placement to raise some money. The hands...hmmm. Never noticed.
Washington, D.C.: Shannon:
There is a CEO I'd like to hear more about. Russ Ramsey was promoted to Co-CEO at FBR, recently. Capital Investors was the brainchild of both he and now Gov. Mark Warner. Not one of the companies funded by Capital Investors has seen an IPO and most likely never will. Steve Case was a reluctant player at CI and did invest his personal monies in the CI start-ups. Mario Morino, another key player at CI, has left the D.C. area for the most part. About the only thing that was successful at FBR under Russ' tutelage, FBR Tech Partners, has been out of his hands for over two years now. What will become of Russ Ramsey in light of the multitude of failed projects? FBR is a publicly traded company and one wonders what the shareholders think of the leadership there. I realize that you have a great working relationship with Russ and hope you can shed some thought on this.
Shannon Henry: Actually Russ Ramsey isn't doing much at FBR these days. He's running a combination hedge fund/private equity fund called Capital Crossover Partners. He got a bunch of his friends, including Ted Leonsis and John Sidgmore, to put money into this fund, which bets on troubled companies (i.e. telecoms) and other downturns in the market. Right after Sept. 11 he invested in travel sites with the thought they were undervalued. Some call this a "vulture fund." As for FBR's technology venture fund...it is basically done. It hasn't made new investments in more than a year and there are no plans to raise more money.
Reston, Va.: With the removal of Steve Case as head of AOL Time Warner, do you really believe "AOL Time Warner" will go back to just being "Time Warner" (sans "AOL")? If management does decide to remove "AOL" from their name, what does this mean for the online division? Is it in Time Warner's interest to spin-off the stagnant online services division?
Shannon Henry: Don't underestimate symbolism. The fact that AOL is first in the name irritates Time Warnerites to no end. Also, many of the Time Warner properties are doing better than AOL's service. With very few AOL stalwarts at the helm, I think a name change will happen. Not sure when....although it would obviously take place if AOL was spun off.
Washington, D.C.: This morning's column addressed the faces of successful companies -- AOL, Proxicom, MicroStrategy, etc. What is Saylor doing these days, and what do you predict/expect for the guy that sold Proxicom for a ton of money?
Shannon Henry: Saylor is not talking much to press these days, but MicroStrategists say he's busy wooing customers and working on the company, conscious that his "face" is not the best to put forward. His co-founder Sanju Bansal has taken more of a public role. Proxicom's Fernandez is having fun being a sports owner on Ted Leonsis's team, enjoying a first baby and doing some venture capital deals for General Atlantic. He's only in his mid-30s, so hard to believe he's retired now....I think he's struggling with what to do next.
Laurel, Md.: This may not be the perfect forum for this comment, but I didn't come up with it until reading Robert Samuelson's column yesterday:
The Internet has tremendously improved my life. I've developed new hobbies, kept informed on issues from many perspectives, maintained better contact with distant family, arranged trips I wouldn't have taken otherwise and bought merchandise I would never have even thought of owning without it. But it hasn't motivated me to spend any additional money; it's just saved me money I otherwise would have spent more of on different things.
The Internet has brought fundamental changes to our lives -- but serving as an engine of economic growth isn't one of them. The purpose of the Internet is to be a medium for free (in both the monetary and liberty sense) exchange of information. It's very nature makes it difficult to make money on it, unless you're providing a service that thrives by exploiting that free exchange (like EBay) but makes traffickers in private information (like travel agencies) less profitable.
Don't forget that the Internet started out as a government program. A lot of things government does -- like protect the environment, police our neighborhoods, operate libraries and repair bridges -- improve our quality of life in ways that traditional economic measures don't capture. People who fixate on government solely as an expense that slows economic growth tend to lose sight of that.
Shannon Henry: Thanks for the comments. Yes, many think the Internet can change our lives but is not destined to make anyone rich. What's so bad about that?
Arlington, Va.: Do you think this is the year we might pull out of this technology slump?
Shannon Henry: Most of my sources have a gloomy forecast this year...although some think it could pick up toward the end of the year and that 2004 could signal a real recovery. These things are impossible to predict of course, especially with wild cards like war, terrorism, or whatever else could happen.
Arlington, Va.: Now that the Netpreneur program is gone, where do you recommend people go to network in the area's technology community?
Shannon Henry: My advice is to choose groups and events that specifically target what you want to do--meet potential funders? MAVA events. Look for high-level jobs and schmooze with other out of work execs? The Potomac Officers Club. The Northern Virginia Technology Council still holds good get-togethers on a variety of subjects.
Fairfax, Va.: Shannon,
Now that the bubble has burst, and tech is struggling, the stories all sound the same: no funding, bankrupt companies, discredited CEOs. Will you cover other sectors, like Gov't contracting or the "business of Homeland Defense?"
Shannon Henry: I agree it seems many of the stories are the same nowadays. But our job is to cover what's happening out there, and lack of funding, bankrupt companies and discredited CEOs is the reality. We don't make this stuff up. That said I'd love some fresh story lines...got any tips??
Bethesda, Md.: Jim Kimsey (with a few drinks in him) was overheard saying that this was payback for the way he (Kimsey) had been treated at AOL sometime back when Case showed him the door. Any truth to Kimsey's musings?
Shannon Henry: Interesting....there is some love lost between the two. Kimsey probably wasn't happy with the lack of credit he's received for building AOL (most people think of it as Case's baby, but Kimsey came before Case), but he's also probably happy to not have to take the blame this week.
Arlington, Va.: Is anybody still hiring in the technology industry?
Shannon Henry: Yes. Government contracting is hot, with companies like Northrop Grumman, Computer Sciences Corp. and STG all recently announcing they would make large new hires. The question is can commercial workers easily move into the government market? Different culture, sales cycles, financial years, and need for security clearances and background checks suggest it's not so simple.
Washington, D.C.: It is no secret that Steve Case has a lot of enemies. Many of those enemies are right here in the D.C. area. How much of that anti-Case sentiment came out during the research for your latest book?
Shannon Henry: AOL went through a long period where it treated potential partners, customers, and others, as if they were lucky to pay enormous amounts of money to do business with AOL. It was Internet Arrogance. People don't forget that. And whether Case was specifically involved in those deals or not, as the head of the company, he's responsible.
Washington, D.C.: Wave your magic wand and put us back to the time when Levin/Case announced the merger with much hoopla. Could anyone have seen all of this coming? If you could step into Case's shoes for only a moment, what would you do at this juncture?
Shannon Henry: Wow, I wish I had a magic wand, for several projects....but I don't. When the deal happened I thought it was crazy but meant AOL had won. It was clear at that point that things weren't going to last and AOL needed a new strategy--joining with Time Warner could have been a great move. For a variety of reasons, including company culture clash and investor disillusionment with dot coms, it so far hasn't worked. The SEC investigations won't help. Still, if AOL hadn't done the deal, would it have been better off or worse? I think AOL could actually be in worse shape today, and that Time Warner would be in much better position...but then again I don't have that wand. I'm glad I'm not Case, or famous, or rich....;-)
Arlington, Va.: Shannon:
Since it seems like most of the IT jobs in this area will be defense/homeland security related, therefore requiring secret, even top secret, clearances, how do you think this will affect the composition of the IT job force? (E.g., recent college grads, who may have "experimented" within the last 7 years, and admit it, or, those with bad credit card experiences, will almost definitely NOT get a clearance.) Is the local IT force going to get older/less innovative as a result, in your opinion?
Shannon Henry: I do think government jobs attract a different type of person and it's the rare individual who can traverse both worlds. One wrinkle I'm seeing is that some former tech start-up execs are taking that entrepreneurial bug and starting new companies that have nothing to do with tech---a dance company, a business that promotes ride-sharing, etc.
Herndon, Va.: Whatever became of Bill Schrader, former PSINet CEO?
Shannon Henry: Bill Schrader is one of those former high-profile execs who has totally gone into hibernation, following the bankruptcy of PSINet. I actually think he's one of the smartest technologists in town, and that he'll eventually be back with some project. Until then he's learned there's no need to be a prominent player. When last I spoke to him he said he no longer intended to be a public figure. Reminded me of Greta Garbo.
Gaithersburg, Md.: I have noticed that many of the tech council meetings are individuals or small businesses trying to sell to each other. Do you have any recommendations on where to meet and talk to people in the tech industry who are not trying to sell something or find a job?
Shannon Henry: That's the problem with these events, packed with salespeople and job-seekers.....do homework on each event and think carefully before you go about what you want to accomplish or who you want to meet. Ask others in your industry which events they've found to be most helpful.
Washington, D.C., too: Without a doubt, AOL behaved in the most arrogant manner possible. Steve Case was a member of Capital Investors--an angel fund in town. He refused to attend most dinner meetings and would not give his phone number to the CI crew to contact him. He was "God" in that circle. Now, Warner is governor and Case has been dismissed from AOL. Payback really is a bit-- isn't it?
Shannon Henry: I know this story well...and yes, people remember. Ever hear of the term schadenfraude?
Darnestown, Md.: How are the sales of The Dinner Club going these days? It was a helluva read. Thanks for investing the time and thanks to The Washington Post for giving you that time.
Shannon Henry: Thanks so much...it's been fun and people seem to be enjoying and learning from the book. Yes, the Post is a terrific supporter of book projects!
washingtonpost.com: I've got to sign off now, but thanks for all the interesting questions and I'm sorry I couldn't get to them all. But never fear, this is one of our continuing story lines;-)
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