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AOL’s Case NEW YORK -- To Steve Case, the customer always comes first.
gets the last laugh
on his skeptics
With the Time Warner merger
Combined firm promises to break new ground
complete, he is years ahead of
his own growth predictionsFrom staff and wire reports
That was his credo when he ran a juice stand in Hawaii as a kid, and later marketed pineapple toppings for Pizza Hut or developing his Internet service provider America Online into such a giant that it could eventually buy out one of America's media institutions, Time Warner Inc. At the combined company, AOL Time Warner, Case has turned in his AOL chief executive hat to become chairman of the new media powerhouse.
The ability to gauge public tastes and demands was never more evident than five years ago when Case predicted that by 2005, AOL would be as big a force on the Internet as Microsoft Corp. was in software.
Everyone laughed, including Microsoft supremo Bill Gates, who once told Case: "I can buy 20 percent of you, or I can buy all of you. Or I can go in this business myself and bury you."
No one is laughing now that AOL has closed its $106 billion union with Time Warner, making Case the undisputed king of the Internet, years ahead of schedule.
Yet despite his brash prediction, Case, 42, is no egomaniac.
He has about $1 billion in AOL stock, but he often eats in the company cafeteria where he is said to be especially fond of the turkey sandwiches and Sun Chips. He defines "office casual" with his usual garb of jeans and sports or Hawaiian shirts.
Case owns a modest home outside Washington, D.C., where he lives with his second wife, Jean, and five children.
The key to his success has been in understanding how an existing technology could affect ordinary people, making that idea accessible to a mass audience, and then marketing it.
"Right now, there is too much focus on the technology and not enough on the consumer," Case once said.
He caught the business bug early, selling lemonade, magazines, and plant seeds with his brother Dan as a youngster in Hawaii. He also wrote rock music reviews for Punahou School's newspaper to get free records and concert tickets.
And even though he majored in political science at prestigious Williams College -- where he sang in two new-wave rock bands -- it was not government or law that became his calling, but marketing and advertising. His focus became clear after reading "The Third Wave" by Alvin Toffler, a book about what an interconnected society might look like.
After graduating in 1980, he worked at Procter & Gamble Co. in Cincinnati for two years as a brand manager marketing, among other things, home-permanent kits. Cincinnati was one of two cities in the country that were part of an experiment in interactive television, Qube, which was being test-marketed in a joint venture of Warner Bros. and American Express Co.
It was a crude system, but Case was enchanted by the possibilities. By 1982, when he had moved to Kansas City to develop ideas for Pizza Hut toppings (pineapple was one of his winners), he was already online.
"There was something magical about being able to sit at home in Kansas City and talk to people all over the world," he said. "It wasn't a great leap of faith to think that if you made it affordable and easy to use, people would want it."
Case's passion grew into Quantum Computer Services, which he started in 1985 with two colleagues. It designed custom online offerings for the new crop of PC manufacturers.
In 1991, Case decided to mass-produce software for everyone and changed the name of the company to America Online, which went public in 1992. By the end of 1999, the stock traded at 10 times the price it had been in the fall of 1998, giving Case the resources to do the once unthinkable -- buy Time Warner.
Case maintains contact with family and friends in Hawaii, where his father Dan is a prominent attorney. In 1999, Case gave a batch of AOL shares to Punahou School, where he graduated from high school in 1976, and Punahou converted it into about $8 million cash to invest in a number of improvements. He has made major business investments in the islands, too. In 1999 he spent $39 million for a 42 percent stake in Maui Land & Pineapple Co. Six weeks ago, Case spent $26 million to buy financially troubled Grove Farm Co., a former sugar company that had moved into tourism and shopping center operations.
WASHINGTON -- Newlyweds America Online and Time Warner promise to harness their vast resources to expand consumer choice for Internet access, entertainment and communications. AOL Time Warner
to break new ground
for consumersBy Kalpana Srinivasan
Associated PressTo make sure the $106 billion merger doesn't have just the opposite effect, the government has set strict limits to keep the companies from crushing the competition. Those include a requirement that AOL must make future generations of its popular instant messaging service work with competing services.
The companies crossed their last regulatory hurdle and swiftly moved to close their deal late last night -- a year and a day after announcing the unprecedented combination of old and new media.
The new AOL Time Warner Inc. wasted no time in touting the benefits consumers could expect from the fusion of the nation's largest Internet provider and a media titan. Executives said the company would break new ground in emerging technologies such as digital music, high-speed Internet access and interactive television.
"Our brands, services and technologies already touch hundreds of millions of people," said Chairman Steve Case, whose company AOL serves 26 million Internet subscribers. "We will embed the AOL Time Warner experience more deeply into their everyday lives."
The merger puts Case, 42, who grew up in Honolulu and is a Punahou School graduate, in charge of the world's largest Internet and media conglomerate, worth about $190 billion. AOL Time Warner expects to have $40 billion in sales and $11 billion in cash flow in the first year, the companies said.
Time Warner owns the cable networks CNN, HBO, and the Cartoon Network; magazine titles such as Time, People and Sports Illustrated; and offers movies and other programming under its Warner Bros. labels. It has a vast system of cable lines, second only to AT&T Corp.
In its first day of trading -- under America Online's ticker symbol "AOL" -- the merged company's stock closed down 76 cents at $46.47 on the New York Stock Exchange. Shareholders of Time Warner get 1.5 shares of the new entity for each of their shares. America Online shareholders get one share of AOL Time Warner for each of theirs and will own about 55 percent of the combined company. America Online also has assumed about $18.1 billion in Time Warner debt.
New CEO Gerald Levin, said the range of businesses under the company's umbrella -- which includes movies, magazines, music and Internet services -- will "empower consumers in new and exciting ways."
But William Kennard, chairman of the Federal Communications Commission, said the agency wasn't willing to rely on the companies' good intentions. Instead, the agency set in place a series of conditions designed to define the company's role in offering growing services, while at the same time avoiding heavy-handed regulation of new technology. "It presented some very novel issues," Kennard said at a news conference today. Ultimately, "We put safeguards in to make sure the public is protected."
Public interest groups cheered the merger decision. Gene Kimmelman of Consumers Union said the government had "transformed a merger that threatened competition into one that could actually expand consumers' choices for high-speed Internet and interactive TV services."
The combined company will be required to make AOL's popular instant messaging service communicate with services offered by rivals. But that won't happen until instant messaging evolves to next generation services offered over Time Warner cable lines. That could include two-way video teleconferencing or the sharing of music clips and other files between users. Before AOL Time Warner can offer such advanced services, it must either implement an industrywide standard to make different services communicate with each other or enter contracts to show its system can operate with at least three rivals within six months.
Rivals Microsoft, ExciteAtHome and AT&T had sought a broader condition forcing AOL to open its existing messaging service -- the short, real-time text messages millions of consumers now use -- to competitors.
The commission also fine-tuned requirements that antitrust regulators had put in place to protect consumer choice for high-speed Internet services. The Federal Trade Commission already had ordered AOL Time Warner to offer on its high-speed cable lines Internet providers other than AOL, such as EarthLink or Juno Online Services.
The merger between America Online and Time Warner was finalized late last night, a year and a day after it was first announced. Here is a look at the top 10 worldwide mergers, the merger partners, date of completion, and the value of the merger upon completion of the deal. Top 10 worldwide mergers
Associated Press1. Vodafone AirTouch PLC-Mannesmann AG; April 12, 2000; $161 billion.
2. Pfizer Inc.-Warner-Lambert Co.; June 19, 2000; $116 billion.
3. America Online Inc.-Time Warner Inc.; Jan. 11, 2001; $106 billion.
4. Exxon Corp.-Mobil Corp.; Nov. 30, 1999; $81 billion.
5. Glaxo Wellcome PLC-SmithKline Beecham PLC; Dec. 27, 2000; $74 billion.
6. SBC Communications Inc.-Ameritech; Oct. 8, 1999; $72 billion.
7. VodafoneGroup PLC-Airtouch Communications Inc.; June 30, 1999; $69 billion.
8. Bell Atlantic Corp.-GTE Corp. (now Verizon); May 30, 2000; $60 billion.
9. Total Fina-Elf Aquitaine (now Total Fina Elf S.A.); Feb. 9, 2000; $54 billion.
10. Viacom Inc.-CBS Corp.; May 4, 2000; $50 billion.Sources: Thomson Financial Securities Data; AP wire reports.