The purpose of this research paper is to examine the impact to the company’s bottom line of divesting AOL from Time Warner and of selling the AOL Europe holdings. The conversant Time Warner merged with AOL in 2001. This produced a loss in value to both entities. Since the merger, Time Warner has looked at ways to either increase its overall revenue through divesting units or portions of the conglomerate by acquiring other companies to help increase earnings potential. This paper looks at the impact to Time Warner if it divests its AOL unit and also what would be the best way to proceed with selling its AOL Europe holdings. This paper will take a historic perspective on memo 8 and memo 10 on this case study.
Internet pioneer America Online purchased Time Warner in January 2000 for $165 billion. This merger would become the biggest in history. At the time, Time Warner was considered to be the largest traditional media company, so the merger was to serve as an indication that timeworn and new media were in the beginning stages of convergence. The AOL/Time Warner merger involved a vertical combination of the biggest Internet content provider with a hefty cable system operator, which offered a channel through which broad band subscribers could have access to Internet content at high speeds. AOL had nearly 30 million subscribers worldwide and they would be positioned to attain access to Time Warner’s information and entertainment territory. They
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In the second quarter of 2000, AOL settled with the SEC with regard to its’ previously discussed controversial accounting policies. AOL agreed to pay a $3.5 million fine and to reissue earnings statements for years 1995 and 1996. By so doing, it wiped out all the profits the company had made. In the 4th quarter of 2002, AOL registered its’ first decrease in subscriptions with a loss of 200,000 members. Every quarter after that showed additional losses, until at the spin off in December
Major companies and corporations that comprise a big part of the United States economy take advantage of certain opportunities such as going public through IPO’s, acquisitions, and mergers. These three approaches provide an additional resource and many times an advantage to expand, become more profitable, or simply save a company’s existence.
In a recent article by the Washington Post, Charter has recently acquired the rights to Time Warner Cable (TWC) in a $55 billion dollar deal (Kang). This comes a few weeks after Comcast, a close competitor withdrew it’s own merger deal after a potential. The article states that the merger between Charter and TWC creates a viable competitor to Comcast which currently has 40 percent of all broadband internet subscribers. With the merger the article states that the company New Charter, would have a 35 percent share of the current broadband market, compared to Comcast which would have had more than 50 percent.
“Comcast” is one of many companies that own’s and works in the media industry, they not only own two very important primary businesses, Comcast Cable and NBCUniversal but are known as the largest cable television operator in the United States. They offer their customers a large variety of entertainment technology from video, high-speed Internet and phone providers, to residential customers under the XFINITY brand. As “Comcast works in the media industry they are always “aspiring to evolve to the next level of a corporation” and they are nearly there. They are already known to have the largest broadcasting and cable company in world by revenue, and from further research, we known that they are already America’s largest media conglomerate. Their name, “Comcast is a blend of the words “Communication” and “Broadcast”.
Beside this mistake, America Online has made more mistakes; another example is music they offered on a program disc, where the allocated URL belonged to a competitor. All mistakes could have been avoided with better research and preparation. AOL should try to anticipate these mistakes in the future, by adjusting their marketing approaches to different countries and their cultures. AOL should realize that its American approach is perceived in many other countries as too aggressive, thereby offending not only local competitors but also national consumers.
This giant is still not satisfied with the profitable margin that it receives each year. Comcast merged with Time Warner Cable in 2005 to purchase the competition, Adelphia Communications. In purchasing the fifth largest cable company comes all of their subscribers making Comcast a colossal company. Now that it has majority control over the market, Comcast is selling the idea to the public that the services they will provide will benefit the consumer. The large cable company’s know that as a consumer we have no choice but to pay for the entertainment that they provide, which leaves the consumer with no choice at all.
In the editorial “Verizon’s AOL deal: ISPs go searching for content”, by The Times Editorial Board, points out the important benefits that Verizon acquired by buying AOL, the most popular dial-up internet service in the country. The principal reasons of the agreement to buy AOL and the benefits they received are: AOL’s content business, the subscriber's exclusive content access, and the probability to have preferable treatment to sites and services for their customers. First, Verizon's smart move was to obtain primarily the business content from AOL. All the advertising tools from AOL are an important investment for the future of Verizon's strong standing. Another benefit that Verizon obtain from AOL was the subscribers
In 1983 AOL began life in large part thanks to Bill Von Meister, and only had one product. In fact the company was first called Control Video Corporation. In 2015 as a company was sold to Verizon for 4.4 Billion. To say at the very least, AOL did something right as a corporation over the years. The first product they every came out with was called GameLine, which is a service that hooked your Atari 2600 to your phone line to rent games for 1 dollar (fastcompany). Not soon after it’s beginning, Control Video Corporation collapsed and over 90 % of its staffed were fired. However out of the ashes of Control Video Corporation, in 1985 Steve Case founded “Quantum
As a communication giant with solid foundation, Verizon is still facing a transition from simple communication service to multiple internet services. Some people think that the acquisition of Yahoo is an extensional action of Verizon acquiring AOL last year, because AOL and Yahoo are similar traditional internet business. The core Internet business Yahoo sold to Verizon is a remedy for Verizon’s shortage of digital media business. Through Yahoo's online business, Verizon’s future layout may be faster. The online digital media services platform will not only help Verizon’s business expansion, but also can help Verizon to further enhance its corporate value and brand through Internet channels. CEO Lowell McAdam of Verizon says his company intends to become a significant player in digital media. (Knutson, 2016)
Share holders suffered even more, as stock prices plummeted from the time the merger was first announced. A major part of the failure of this merger was the fact that developing a “learning culture” was never considered, and no strategic vision was created for the newly merged organizations. For example Time Warner Cable’s high speed Internet services, Road Runner, as part of its profitable cable operations was never integrated with AOL as Case explained in his 2005 article in the Washington Post (6/ 11/05: B01). The first AOL Time Warner Annual Report (2000) claimed that it was fostering “… a nimble, entrepreneurial culture that recognizes that it can only succeed if everyone supports the new organization based on a shared set of values and common goals.” Unfortunately, the team-work necessary to integrate the two companies never happened, because there was no shared strategic vision of what the merger should be, and where it would be going. Merger Failure and the Need for a Culture of Learning According to some estimates, 85% of merger failures are related to the mismanagement of cultural issues. Awareness of cultural differences is then seen as an issue of primary concern when organizations merge. According to Miller (2000:8): “Once you develop an understanding of the current culture, and have compared that with the goals of the merged
Time Warner is also taking part in joint ventures which bring it more opportunities to advertise and sell its products. For example, in 1993 Time Warner and US West worked together to improve U.S. cable systems to an interactive fiber-optic data highway that could lead to such direct services to the home as music on demand and video on demand. This deal was based on U.S. West investing $2.5 billion in Time Warner Inc. which gave them a big stake (25.5%)in
In this essay, I will address why it is in The Group’s main interest to support the Tax Director’s decision about restructuring the company and re-incorporating The Group’s headquarters from US Inc. to the newly incorporated UK PLC, which would be the new holding company. As a result, the distribution functions of European subsidiaries would be centralized in the newly incorporated company based in Switzerland (SWISSCO.) Through identifying and considering all the variables, I will evaluate the restructuring of the company. My conclusion is supported by a number of variables and only applies if all the variables mentioned are
Acquisitions and mergers is the growth strategy of many companies today. Sometime a company may decide to buy shares in another company while other times a company may decide to acquire the whole company. This paper discusses how Dow Chemical could benefit from the acquisition of DuPont. It will also cover the various accounting methods used.
The case study is Macy’s Department Store Repositioning. The key problem is that the traditional department stores sales and profits are declining. There are specialty stores, discount stores, and online stores that offer similar products at a fraction of the cost for the most part. However, in the declining market for the department store industry, Macy’s consolidated stores, established a national department store and continues to make a steady profit. It is usually the time to divest, sale,