America Online Inc. co-founder Steve Case resigned as a director of Time Warner Inc. yesterday, only days after the board was informed about ongoing talks with rivals Google Inc. and Microsoft Corp. about the possible sale of a minority stake in AOL.
Case continues to own more than $300 million of Time Warner stock and options. By resigning from the board now, he leaves when the Dulles-based Internet unit has reemerged as an object of intense interest, rather than scorn; Case became a lightning rod for controversy after engineering the $112 billion merger of AOL and Time Warner in 2001 that eventually wiped out tens of billions of dollars of value for Time Warner shareholders.
By resigning, Case also gains flexibility to sell Time Warner stock if it increases in value following any AOL deal, and he has told people that he may speak out publicly about his views on the company's handling of America Online and other issues.
In a statement, Case said he resigned to focus on Revolution LLC, his District-based holding company for a variety of health care and leisure travel firms. Case's company may soon be in negotiations with Time Warner Cable over carrying a revamped cable channel called Lime, which gets its name from the notion of health care with a twist. By leaving the board, Case eliminates potential conflicts of interest in those talks, according to a source who spoke on condition of anonymity because the plans are confidential.
Corporate financier Carl C. Icahn -- who heads a group that has purchased about 3 percent of Time Warner stock and is pressuring chairman and chief executive Richard D. Parsons to take steps to boost its languishing share price -- said in an interview that Case could have accomplished more by keeping a seat at the Time Warner boardroom table than by becoming an outside shareholder.
"The last dissenting voice has now been cleared out of the boardroom," Icahn said. "I hope that the future does not hold a juicy contract between Steve Case's new company and Time Warner, as a 'thank you' for leaving the board. I also hope that in the AOL deal, whatever it may be, shareholder value will not be sacrificed at the altar of keeping control at Time Warner."
Time Warner has made it clear in talks with Google and Microsoft that it is interested in selling only a minority stake in AOL and wants to maintain voting control. Yahoo Inc., which expressed interest in acquiring AOL in its entirety, has been rebuffed by Time Warner, according to two people familiar with those confidential negotiations.
Scott Kessler, an analyst with Standard & Poor's Corp., said Case's departure from Time Warner marks the end of an era. "When people think of the old AOL, they think of the failed merger with Time Warner, and they think of Steve Case," Kessler said. "A lot of folks want to get beyond that."
In a statement, Case described his decision to leave the board as difficult but emphasized that the move will enable him to avoid potential conflicts of interest as Revolution expands into new areas that may compete against, or do business with, Time Warner. He also predicted that AOL, which has been losing 2 million subscribers a year, "can return to its former greatness."
"Over the past few months, I have been pleased to see a renewed focus on AOL at Time Warner, and the emergence of so many strategic alternatives," Case said in the statement. "I will remain actively engaged as strategies for AOL's future are considered, and as steps are taken to maximize Time Warner shareholder value."
Parsons said in a news release that he will miss having Case on the board. "We have great respect for his long record of achievement -- as a co-founder of AOL . . . [and as] a valuable member of our board. As Steve is one of our major individual shareholders, we'll look forward to his wise counsel."
Time Warner will be reviewing its options for AOL in the coming weeks. Google is the main search engine on the AOL service, providing America Online users with rapid results from Internet searches, as well as displaying ads that generate hundreds of millions of dollars in revenue annually. AOL, which has 112 million monthly visitors to its Web properties, is Google's single biggest ad partner. Microsoft, which is flush with cash, hopes to win a stake in AOL by offering Time Warner a hefty sum of money in exchange for replacing Google with its MSN search engine.