Lazard: Time Warner Flubbed AOL

Time Warner has mismanaged America Online at every juncture since the 2001 merger. That's the conclusion reached by Lazard, the financial firm hired by financier Carl Icahn in his effort to oust Time Warner's current board.

In a 343-page report unveiled Tuesday, Lazard concluded that Time Warner should be split into four separate companies: AOL, a publishing company, a cable company, and a content company.

"Time Warner's missteps have been particularly value-destroying at AOL. Since 2002, almost every strategic decision concerning AOL has been wrong," stated the report.

Lazard took particular issue with Time Warner's decision to run AOL as a subscriber-only site until last year. "This reliance on a walled garden approach beyond its useful life compromised AOL's ability to participate in the growth of the all important paid search and advertising categories," stated the report. "AOL is opening up the walled garden, but it may be too little too late, as users have already developed loyalties to other offerings."

Time Warner also came in for criticism for failing to develop AOL's own search capabilities and for failing to bundle broadband with Time Warner Cable until last year.

AOL founder Steve Case made many of the same points in an essay in the Washington Post last December, in which he advocated undoing the merger with Time Warner that he had engineered six years ago.

After the presentation, Time Warner said in a statement: "Our board and management regularly review all of the strategic options for managing this company to create the greatest value for our shareholders. We are on the right path. The company is delivering."

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