Aol/time Warner Merger

Managing A Business

AOL and Time Warner: Fragile Promises

The AOLTW merger was heralded the "Deal of the Century" due to the fact that the combination of the two companies would 'produce the first fully integrated media and communications company' (Bovee, Thill, & Mescon, 2005, p.162). The companies planned to feed off of each other's success and promote each other after signing this $160 million dollar merger. It appeared very possible that together, they could dominate access to the Internet.

Time Warner had just failed miserably at attempting to move into the digital era and had lost a lot of money. TW was excited at the prospect of taking part in the Internet revolution and was confident that the company would profit greatly from the merger.

As a merged company, AOL and Time Warner had to deal with jeers from critics and shareholders who were not convinced the company could succeed. Shortly after the merger was made legal, the U.S. was hit with a recession that rocked the dot-com world. As a result, AOL was not gaining as many subscribers as predicted and lost $98.7 billion in 2002.

In January 2006, AOL announced plans to partner with leading providers including BellSouth, Time Warner Cable and Verizon, as well as other major DSL suppliers (Primrose, 2006). After what was referred to in hindsight as "the worst deal in history", AOL and Time Warner are once again doing business together.

Time Warner continues to be financially successful, with or without AOL. While most of the senior executives at AOL who were involved with the merger have since left the company (some are even working at Time Warner!), turnover among high-level execs at Time Warner has not been near as high. It must be noted, though, that none of the current Senior Corporate Executives held that position at the time this merger went into effect.

The Ax Falls on Sunbeam's Chainsaw Al

The goals set for Sunbeam by Al Dunlap were unrealistic for Sunbeam because the industry average for growth in sales was 2.5% and Dunlap was expecting a 20% increase for Sunbeam. It would have taken more than just a miracle to meet the goals he set, but he refused to acknowledge that the odds were stacked against Sunbeam.

Dunlap's slice and dice plan was a short-term strategy. He had a history of saving failing companies by cutting jobs, cutting costs, and selling quick. He did not stay around to see where the company was headed, never committed to a company for the long-term.

Dunlap's strategy backfired because he failed to heed the warnings of Sunbeam executives,