Pittman steps down from AOL Time Warner post

NEW YORK -- Bob Pittman stepped down as chief operating officer of AOL Time Warner in a shake-up Thursday at the world's largest media company, which has seen its stock dragged down by its flagging America Online division.

The announcement came after weeks of speculation that Pittman had been unhappy with pressures from senior management. Pittman had been dispatched in April to rescue the AOL division, which has had a steep drop in advertising revenue.

AOL Time Warner stock had fallen Thursday after The Washington Post published an article detailing what it called unconventional deals to boost revenue before and after the merger that created the company.

Pittman, a veteran of the AOL side of the company, had been widely associated with lofty promises for growth that were made to investors shortly after the merger of AOL and Time Warner was announced in 2000.

The company never fulfilled those promises, and angered investors by sticking to those targets long after most observers stopped believing them.

As part of the shake-up, two top executives from the Time Warner side of the company were elevated: HBO chairman Jeff Bewkes will head up the company's entertainment and networks businesses, and Time Inc. chairman Don Logan will lead a media and communications group.

Bewkes will lead an "entertainment and networks" group that will comprise HBO, New Line Cinema, Turner Networks -- which includes CNN -- the WB network, and the Warner Bros. movie studios and Warner Music.

Logan, head of the company's highly successful magazine division, will lead a new group of media and communications businesses including America Online, Time Inc. and Time Warner Cable.

Both executives will report directly to Dick Parsons, the chief executive.

Bewkes and Logan said they intend to preserve the autonomy of the company's operating divisions and sounded a more low-key tone on promising the kinds of cross-divisional synergies than Pittman had.

"What we would bring to the table would be a greater sense of urgency in looking for cross-divisional opportunities," Logan said.

The announcement of the shake-up came after the close of regular trading on the New York Stock Exchange, where AOL Time Warner had fallen 66 cents, or 5 percent, to $12.45 on concerns about its accounting methods. The stock has fallen about 60 percent this year, from around $32.

The shake-up came the day of a regularly scheduled meeting of AOL Time Warner's board of directors and the same.

Thursday's Washington Post article said AOL used a number of unusual techniques to boost its revenue between July 2000 and March 2002. The story, which was based on a lengthy review of confidential documents from AOL, reported that the company converted legal disputes into advertising deals, shifted revenue from one division to another, and sold ads on behalf of eBay and booked them as its own revenue.

AOL spokesman John Buckley said that all the transactions discussed in the article were appropriate and in accordance with generally accepted accounting principles and that AOL's auditors, Ernst & Young, had signed off on all the transactions.

While the amounts of the deals involved came up to just $270 million, about 5 percent of the company's nearly $5 billion in advertising business in the period reviewed, the company would have fallen short of analysts' estimates for ad revenue growth, which would have probably hurt the stock.

Because of the accounting scandals at Enron, Adelphia and Global Crossing, investors have become extremely sensitive to any questions that a company may be using questionable techniques to make its results look better.

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