America Online and Time Warner tied the knot in January of 2001, but now that knot appears to be unravelling as AOL suffers financial losses, internal tension and the exits of former AOL top brass, including founder Steve Case.
During the release of AOL Time Warner's results on Wednesday, it was revealed that vice-chairman Ted Turner is the latest executive to jump ship, preferring to pursue "philanthropic interests".
Turner said that he did not come to the decision lightly, given that the company had been part of his life for more than 50 years.
Both Turner and Case will depart in May, leavings much of AOL Time Warner's future in the hands of chief executive officer Dick Parsons, who may tapped to take over Case's post as chairman when he officially steps down.
On Wednesday, Parsons said that investigations into AOL Time Warner's accounting practices were continuing. The probes were initially disclosed last year, and focus on allegations that AOL double-booked advertising revenue.
The conglomerate launched an internal investigation into AOL's accounting and turned up a handful of questionable transactions, leading the company to announce late last year that it would be restating two years of financial results.
The accounting issue is just one of the financial problems weighing on the AOL division, which reported an 11% decline in earnings before taxes, interest, depreciation and amortisation for the fourth quarter of 2002 on revenues that fell 6% year on year.
AOL's pre-tax earnings for the quarter came in at $474m on revenue of $2.3bn, compared with $701m for the fourth-quarter of 2001 on revenue of $2.2bn.
AOL's continued weakness, which has been pinned on the evaporation of the online ad market, slowed subscriber growth, and a slow move into broadband has been cited for a near 70% drop in AOL Time Warner stock since the merger.
The problem has not only resulted in former Time Warner executives wresting power from AOL, it has prompted the conglomerate to take multibillion-dollar write-downs over the difference between what AOL was valued at during the merger and what it is worth now.
On Wednesday AOL Time Warner announced that it took a staggering $45.5bn non-cash goodwill charge as a result of the decline in value of AOL and other intangible assets during the fourth quarter. The company took another $54bn charge in the first quarter of 2002 under new accounting rules to reflect a decline in assets since the merger.
Many industry observers have come to question the wisdom of the merger, which was valued at $350bn when the all-stock transaction occurred, and AOL Time Warner executives are already aware of the comparisons. Chief financial officer Wayne Pace said, "I know these are big numbers and are going to create a lot of comments in the marketplace."
The company is keeping a stiff upper lip, however, as Parsons tagged 2003 as a "reset year" for the company. Although he forecast no immediate improvement in the online advertising market or in AOL's revenues, he did proclaim his faith in the strategy to revamp AOL.
This plan includes increasing the number of broadband subscribers, scoring exclusive content deals and serving up premium services. However, analysts have been speculating over the possibility that AOL might be spun off.
While denying that a spin-off is in the works, AOL time Warner executives did not discount it as a last-ditch effort to get the company back on track.
For now, AOLTW will be focusing on reducing its debt load and refocusing its capital investments, Parsons said.
Users filled up Internet chat boards with their own take on the AOL saga yesterday.
One user, identified as "George W Boosh", wrote, "Of course they are losing money. They charge an arm and a leg for services that are available from any ISP for free."
Another user, identified as "Carl23" took a more practical approach, writing, "At least now AOL will have to focus on improving."
This was first published in January 2003