Monday, January 04, 2010

Gerald Levin & Steve Case on CNBC This Morning: TimeWarner-AOL Merger Failure

CNBC had former AOL CEO Steve Case as guest host this morning for several hours. As his guest, Case invited his former co-CEO, TimeWarner's Gerald Levin, to appear and discuss the merger which is now generally regarded as the worst of that decade, or the past ten years, if it's not a formally-demarcated decade.

The exchanges among Case, Levin, and the CNBC co-anchors, as well as Levin's own soliloquy, were amazing. And not in a good way.

First, let me remark on Levin's performance.

If memory serves, Levin's son was murdered in a highway robbery-and-murder case sometime during the aftermath of the TimeWarner-AOL merger. Even back then, I believe Levin gave the event some weight in his decision to leave the company. It's fair to say that it had a profound effect on him.

That said, Levin's new persona is, to be blunt, stomach-churning. He now sports a goatee/beard and moustache, jacket and open-collared dress shirt, and a whole new, evidently therapist-supplied vocabulary of kindness and gentility.

Levin took total responsibility for the merger's failure, absolving Case, who sat only a few feet away, as well as the TimeWarner board.

This is ridiculous. As I said to colleagues at the hedge fund with which I worked at the time, the TimeWarner board should have engaged an investment bank, economist and valuation consultant to build a case that TW's shareholders would be harmed in the long term by being forced to buy a temporarily overvalued AOL with TW equity. It wouldn't have taken too much to construct a reasonable defense that would have allowed Levin and his board to contest the merger bid from Case's AOL.

In any event, Levin's statements merely add to the view that corporate boards are meaningless. Not to mention that he implied that he would have, or did, simply ignore whatever his board, as shareholder trustees, wanted, and forged ahead regardless.

Thus, I think Levin marked himself this morning as simply a poor, inept CEO.

However, Levin then took questions and pontificated on large mergers, TimeWarner-AOL's subsequent inept merger implementation, and various other managerial topics.

His comments were peppered with soft, touchy-feely phrases which really do suggest he's spent a lot of time and money on therapy. The phrases, which I can't recall exactly, truly sounded like a well-rehearsed mantra which emanated from his therapist's mouth.

Essentially, Levin alleged that the post-merger challenges were all about people, expectations, fears, etc., and that he and Case were required to satisfy "Wall Street" expectations. Thus, Wall Street was the villain, and poor Levin and Case were just babes in the woods as they tried to merge and then manage the two companies.

Case chimed in similarly, which isn't surprising. He has taken his winnings and moved on to another web-based business. It's easy for him to now declare that it was really always about people, not technology.

That's not what he said at the time of the merger.

Further, Levin now confesses that the performance that he and Case promised in the first merged year was, in reality, unrealistic.

Sounds like fraud and incredibly naive management, doesn't it? I mean, Levin didn't stop the deal because he couldn't commit to the performance he believed was required by shareholders or analysts. Neither did Case. Neither resigned or said they really wouldn't be up to the task.

No, they both took lavish compensation and then, much later, declare that it was never really possible to meet investors' expectations anyway.

Pardon me, but who exactly set those expectations in the first place? Wasn't it Case and Levin, to justify a merger that few thought was really worthwhile?

Let's be really frank here. In 1999, nobody wrote blogs, and I didn't write this one. But at the time, I verbally declared to all who would listen that the TimeWarner-AOL merger was simply a case of the latter cashing in on its temporary valuation surge, at the expense of the former. Nothing more, nothing less.

There was zero business reason for the merger. I immediately sold the shares I held by virtue of my AOL position when the merger closed.

To see Levin now denounce GE, Citigroup, and a host of other companies as lacking in focus and managerial sensitivity, or whatever it was he babbled about, was almost embarrassing.

Equally embarrassing was that nobody on CNBC even pretended to question, challenge or otherwise call Levin, and, for that matter, Case to account for the mess they created.

It was shameful. Instead of grilling the two in front of business viewers, they just lobbed softball comments and occasional helpful, nearly adulatory questions.

From what I saw, Levin is just one of at least two lawyers who inherited large, unwieldy companies and mismanaged them into disaster. The other, of course, is Citi's Chuck Prince.

To suggest that Levin has anything worthwhile to tell anyone else, or any other CEO, except,

'Don't be a lawyer and try to pretend to be CEO at a large, complex, already-undperforming company,'

is just plain silly.

Levin isn't some accomplished graybeard former CEO. He is a failed wannabe-CEO. Steve Case induced Levin to snooker his own board and rob his own shareholders' wealth to give it to investors in AOL.

CNBC does a great disservice to business and investors everywhere by giving Levin and Case this platform, sans critical questioning. Levin and Case then proceeded to compound the mistake by behaving like they were somehow victims, themselves.

All in all, a disgusting, nauseating performance this morning on CNBC.

No comments: