A Sad, Infuriating Tale

After being battered in the marketplace, AOL turns to the courts.

James K. Glassman | January 24, 2002

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But AOL Time Warner itself will have to tread in a gingerly fashion to avoid anti-trust crusaders. Its sheer size alone makes it a tempting target. As an Internet Service Provider, AOL at last count had 29 million subscribers; by contrast, Microsoft, at number-two, had just 5 million. AOL also owns Turner Broadcasting, the leading revenue producer in cable, with such networks as CNN, Turner Classic Movies, TBS and the cartoon channel; 60 magazines, including Time, People and Sports Illustrated; Warner Bros. Pictures and television; Warner Music Group; plus the cable properties.

Yet the company, which just announced a new CEO, hasn't been able to put all the pieces together. Revenue, according to the Value Line Investment Survey, is "lackluster" and "subscription revenues are softening." The research service concludes, "Investors should be cautious? Issues of performance and integration still need to be resolved. In addition, there is a risk that the company may have to either raise debt or dilute its stock." Debt, by the way, already stands at $20 billion - a lot of money, even for a company with $38 billion in sales.

Instead of straightening out its business problems, AOL has decided to spend its time and effort filing lawsuits against tough competitors - a petty, distracting pursuit that won't help AOL or, for that matter, the U.S. economy, which depends on firms like Microsoft for the innovation necessary to bring about a technology revival.