"By now, every investor recognizes that Time Warner made a very large mistake by merging with AOL in early 2001."
April 21, 2002 3:22 PM   Subscribe

"By now, every investor recognizes that Time Warner made a very large mistake by merging with AOL in early 2001." A free-falling stock price, continued loss of customers to cable and telephone DSL and "a murky strategy for moving its customers to high-speed connections" has AOL Time Warner on the ropes. At least one analyst is suggesting a spinoff. Bigger is better? Not in this case.
posted by mediareport (18 comments total)
My personal Axis of Evil: AOL, Home Depot, and WalMart. This news does not break my heart.
posted by treywhit at 3:45 PM on April 21, 2002

Treywhit: what about Disney?
posted by delmoi at 3:55 PM on April 21, 2002

...or Microsoft? I thought Microsoft was part of everybody's Axis of Evil...
posted by dogwelder at 4:07 PM on April 21, 2002

Additional comments here.
posted by willnot at 4:12 PM on April 21, 2002

My personal Axis of Evil: AOL, Home Depot, and WalMart

AOL, OK I understand that. Whats the deal with Home Depot. I mean, all those isles, all those power tools. Wal-Mart....where else ya gonna get parts for the toilet when it gets an attitude at 3:00am and does not want to flush.
posted by CJB at 5:17 PM on April 21, 2002

Apologies for somehow missing the April 2 link. It's interesting that as the FCC clears the last remaining blocks to bigger media companies, there's so far not a whole lot of evidence that they result in lots of cost-savings for the bloated giants that result. There's also Clear Channel, of course, which has so far failed to take advantage of the increased efficiency supposedly provided by its "vertical integration" of an entire industry. Aren't huge mergers like these driven more by ego and the need to control vast empires than by any clearly demonstrated cost-savings? Or are there successful examples I'm missing?
posted by mediareport at 6:08 PM on April 21, 2002

Walmart combines corporate steamroller running over small, neighborhood businesses with stores of an aesthetic value which says "tasteless America." As for Home Depot, I tend to agree that while it has killed a number of hardware stores, it's not quite in the same category of odiousness. But it's close; I heard one hardware store owner refer to it as "Agent Orange." Actually, I think there's a synergy between HD a the hardware and traditional supply store: you go to HD, are seduced by the place, and overreach on DIY projects. Then, the project started, you have to go to the hardware store and buy the right item, and get the advice you didn't at HD.
posted by ParisParamus at 6:11 PM on April 21, 2002

Paris, while I usually agree with you, you're wrong about WalMart. Yes, Wal-Mart has "destroyed" some downtowns by some agressive (and probably unfair) price-lowering with which local businesses can't compete. Costco and others have done the same thing.

But the thing is...Walmart's and Costco's have vastly improved the quality of life for many Americans. While us MeFi's are, in the majority, pretty well-off (we all have computers, which most poor don't have), a $20 reduction in a weekly grocery bill is more important than the "aesthetic" quality of Rockwellian downtowns.

As an example, I was recently in Kailua-Kona, Hawaii. It's unbelievably expensive to live there. A cheese pizza at Pizza-Hut was 20 bucks, no joke. But WalMart is still affordable.

(returns thread back to viability of big media)
posted by Kevs at 6:23 PM on April 21, 2002

Treywhit: what about Disney?

I have a 5 year old. To me, Barney is more evil than Mickey.
posted by treywhit at 6:32 PM on April 21, 2002

My personal Axis of Evil: AOL, Home Depot, and WalMart. This news does not break my heart.

I understand your point, treywhit. I hate the way so few companies control so much, and I consider Disney Evil Incarnate, but consider that AOL/TW employs thousands and thousands of people (disclosure: including members of my family). A plummetting stock price and a potential spinoff won't do that much to hurt the big-wigs who are trying to control the world, but the livelyhoods of many average-joes suffer when this stuff happens.
posted by jpoulos at 7:59 PM on April 21, 2002

Mediareport wrote: Aren't huge mergers like these driven more by ego and the need to control vast empires than by any clearly demonstrated cost-savings?

I don't think it's ego, so much as a revenues shell game. Sick, inefficient, bloated corporations are driven for more and bigger earnings. Rather than do the obvious (make the product better and sell more of it) they turn to acquisitions to boost the bottom line. Of course, that also raises the cost structure, which drives even more acquisitions.

I have incredible admiration for Steve Case. He leveraged his ownership in a little computer BBS all the way to the top of the media food chain. It's amazing that Time/Warner shareholders approved the merger. This isn't just 20/20 hindsight. It was recognized at the time that AOL had an inflated market cap. The T/W shareholders were greedy fools for allowing it to go through, and are now reaping their just reward.
posted by chipr at 8:18 PM on April 21, 2002

Sometimes it's not only the actions made by the company which cause things to turn sour. When the AOL/Time/Warner merger occurred, the computer industry still appeared to be rising. Under Clinton's reign as the Big Cheese, the computer industry boomed. Then the election came along, and everyone realized that the country's gonna be run by either the guy who serruptitiously claimed to have had a hand in inventing the Internet, or a guy who thinks a computer is little more than an expensive paperweight. Either way, it didn't look good.

However, I think the real problem is how people expect too much from corporate investment. Let's say Company A made a billion dollars last year. People who invested in Company A are happy. However, to keep them happy, Company A has to make at least a billion dollars next year, and preferably more. Then they have to do the same or better the following year. If this year they make a 83 billion, but next year they only made a fraction of a billion, for many it's considered a failure.
posted by ZachsMind at 1:07 AM on April 22, 2002

Costco and others have done the same thing.

I dunno - always seemed to me that the introduction of a Costco didn't have an appreciable effect on local businesses, what with Costco's having both a membership fee and forcing you to buy in bulk and all. If you want a mainstream good in significant quantity, you go to Costco; if you want a "normal" size quantity - or anything the least bit off the beaten path - you go elsewhere.

Things could easily be different elsewhere... but as best I can tell, the biggest impact from the introduction of my local Costco was eliminating the need for folks visit one an extra half-hour's drive away.
posted by youhas at 1:55 AM on April 22, 2002

My godparents live in a southern Illinois town called Mattoon, IL. There used to be a "Main Street" filled with shops and a couple years ago, a Super Walmart was placed there. Nowadays when we drive down to visit her, we see a 1970s-ish street with a bunch of empty storefronts, something I thought I'd only see in the movies. Walmart is evil, not to mention the fact that the media you get there could be censored.

As for Home Depot, I've had a lot of bad experiences there. The employees don't help you (one or two will, but the majority are always "too busy" or just clueless temps) as they do in those damn commercials that emphasize their employee knowledge.

But hell... big business is very convenient, not to mention the prices are cheaper. There's a really good record store on my campus, and I try to buy my CDs there, but recently I bought some stuff off Amazon.com out of impulse. *blush*
posted by hobbes at 2:14 AM on April 22, 2002

Oh, and I consider TW/AOL to be the silent monopoly. While everyone's raggin' on M$, AOL is slowly taking over. They already own a huge portion of the US media.
posted by hobbes at 2:16 AM on April 22, 2002

chipr - I have incredible admiration for Steve Case. He leveraged his ownership in a little computer BBS all the way to the top of the media food chain.

I don't, because he didn't. He didn't own it or found it. He was given the job because AOL's biggest VC, his brother, got him the job.
posted by NortonDC at 4:45 AM on April 22, 2002

You know, I'm a mac user, and I don't think microsoft is even that bad. I mean, they're bad, but they aren't pure evil like AOL/Time Warner.

They make a pretty decent and functional product, they make it easy for inexperienced users. The security sucks and the code for windows is as we know written in LISP and Fortran and VB, but people seem to like it. And MS office, however much forced on people, is a pretty good damned piece of software. This is what we tend to forget about MS solutions/products, they occasionally deliver.

AOL time warner on the other hand....pure evil crap. AOL especially. Everything wrong with the world. I hope they go under. AOL's indecisiveness on the broadband issue I find completely insane. Broadband absolutely is the future. Hell, when I go somewhere w/only a 56K connection, I don't use the internet. I'm reluctant to even get my mail/jerkcity. There are good companies in this world, and there are bad. You can tell by the way they conduct themselves. AOL uses SPAM, and AOLTW treats people like idiots. They fall into the same category as Verisign or the x10 camera company (who have a webpage which will amaze you - surprisingly it doesn't have any popups.

And Kevs is right on the somewhat unrelated WalMart dilemma. It is awfully easy for us to say it destroys the landscape/fiber of the country. Perhaps in the future more of these services can be done by delivery so that the stores can be eliminated and the landscape restored. William Morris wanted to restore dignity to craftspeople, but I'm sure if he were alive he'd prefer what Walmart sold to the replicas of his own designs the elite trade around.
posted by Settle at 5:21 AM on April 22, 2002

I used to work for NCR (mid-sized computer company with strength in the ATM & retail markets), which was fairly profitable until we were bought out by AT&T, at which point we started losing money big time. After a few years of this, AT&T got smart and cut us loose, at which point we started back to making money. As others have stated above, I'm not convinced that the mega-conglomerates have any real advantage when it comes to being profitable.
posted by tdismukes at 6:46 AM on April 22, 2002

« Older Merchants of Morality   |   The "Hitchhiker's Guide to the Galaxy" Infocom... Newer »

This thread has been archived and is closed to new comments