Can A Nice Guy Run This Thing?

(2 of 2)

Levin has been a tireless proponent of cable-TV systems as the gateway for delivering the Internet and entertainment. He has led AOL Time Warner into a battle with Comcast and Cox--both backed by Microsoft--to buy some or all of AT&T; Broadband, the nation's largest cable company. But some executives and board members argue that there are ways--over telephone lines or by satellite--to reach those households without burdening AOL Time Warner with billions more in debt. Parsons is leading the AT&T; talks and will have to decide what price--in dollars and regulatory scrutiny--is worth paying.

Parsons also has work to do on Wall Street. "Ideally, you want to underpromise and overdeliver," he says. "To the extent that we've lost credibility, repairing it is important." And not so easy. On Friday, Merrill Lynch analyst Jessica Reif Cohen lowered her earnings estimates for this year and next, pointing to clouds ahead. AOL is adding new subscribers at the rate of 12,800 a day--14% less than at the same time last year. AOL Time Warner is locked into a deal, made by AOL in the last days of the Internet bubble, committing it to pay at least $6.75 billion for Bertelsmann's stake in AOL Europe, an entity now valued at about $2 billion. Also troubling Cohen: "The difficulty in replicating the strategic and visionary strengths of Jerry Levin." The stock dropped more than 5% on her dour assessment, bringing it down 42% from postmerger highs.

Levin insists that the challenges ahead did nothing to inspire his departure. He wants, he says, to pursue creative endeavors and "put more poetry" into his life. If anything pushed his retirement forward, he says, it was the Sept. 11 attacks, which dredged up the pain of the 1997 murder of his son Jonathan, a Bronx public school teacher. Parsons compares Levin's reaction to "a Vietnam flashback."

But the timing looks at least partly strategic. One of the shrewdest operators of his day, Levin saw an opportunity to choose his successor--and make clear that it's Time Warner, not AOL, that runs the combined company. Levin says selecting his successor was a lot like producing a Warner Bros. film. "We do all this market testing," Levin says, but "the big mistake is we don't know how to end a movie." In choosing a well-liked, up-by-the-bootstraps guy like Parsons, AOL Time Warner has fashioned a classic Hollywood ending to the Levin era. But Parsons has to deliver a strong performance on earnings growth before the audience will stand up and cheer.