• by Paul Gough , July 18, 2002

Months after retaking control of the troubled American Online unit, AOL Time Warner COO Robert W. Pittman resigned Thursday in a shakeup of the company.

The shakeup, announced after a board of directors meeting in Dulles, Va., creates a new division and moves Time Warner executives into the top slots at the world’s largest media company.

AOL Time Warner has seen revenues fall and its stock price slide, particularly in its Internet business. Other troubles have mounted for AOL. Today’s Washington Post questioned some of AOL’s revenues at a time when the company was about to merge with Time Warner in late 2000 and early 2001. These “unconventional transactions,” as the Post called them, included AOL selling ads for e-Bay but booking them as AOL revenue, trading ads for computer equipment and renegotiating long-term ad contracts to boost quarterly revenue.

Rumors of Pittman’s departure have been circulating for days, sparked by AOL Time Warner’s announcement last week that it had engaged a search firm to find someone to lead the AOL unit. The Wall Street Journal reported today that Pittman, stung by criticism of his handling of AOL, would resign as early as Thursday’s AOL board meeting.

Pittman did tender his resignation Thursday and said he would leave after a new AOL CEO was in place. He’ll leave not only the COO position but also as a director of the AOL Time Warner board. He was a director of the former AOL since 1995, and became CEO in 1998. Pittman led AOL to its merger with Time Warner in January 2001. He became COO of the combined company.

“Having worked so hard to build the AOL service and brand, and after then going through the merger and the last 18 months, it’s time to take a break,” Pittman said in a prepared statement.

AOL Time Warner’s new structure includes a Media & Communications Group, which includes America Online, Time Inc. and Time Warner Cable plus the AOL Time Warner Book Group and Interactive Video unit. The new division will be led by Don Logan, who had been chairman and CEO of Time Inc.

Another new group, Entertainment & Networks, will include HBO, New Line Cinema, The WB and Turner networks, Warner Bros. and Warner Music. Jeff Bewkes will be the chairman of that division, moving over from chairman/CEO of HBO. Both report to AOL Time Warner CEO Richard D. Parsons.

Parsons said the new structure would focus on growth on new products and services.

“Our challenge is to take the lessons we’ve learned over the past two years and use them to make the parts work together to create greater value for our shareholders,” Parsons said in a prepared statement.

Logan will be replaced by Ann Moore, who had been EVP of Time Inc. Chris Albrecht, President of HBO Original Programming, will replaces Bewkes.

AOL Time Warner announced the changes after the market closed. The stock closed at $12.45 a share, down 66 cents. AOL Time Warner stock has fallen more than 60% in 2002.