MAJOR CH-CH-CH-CHANGES
AT AOL TIME WARNER

The new operating structure and new senior leadership appointments were made by AOLTW CEO Richard Parsons following a board meeting Thursday.

After weeks of swirling rumors, Parsons also announced that Pittman has decided to step down as COO and as a director of AOLTW and depart the company after completing the transition to a new CEO at its AOL division.

Under the new structure, Logan becomes Chairman of the new Media & Communications Group, comprising AOL, Time Inc. and Time Warner Cable, as well as the AOL Time Warner Book Group and Interactive Video unit. Bewkes, meanwhile, becomes Chairman of the new Entertainment & Networks Group, comprising HBO, New Line Cinema, The WB, Turner Networks, Warner Bros. and Warner Music Group. Both will report directly to Parsons.

"We have the best media, entertainment and communications businesses in the world, but our challenge—and our goal in making these changes—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. "With Don, Jeff and our business heads on board, we will have a united team focused on driving new growth and developing innovative new products and services.

"Don and Jeff have each proven that they can generate consistent, solid growth over changing economic cycles in businesses such as those they will now oversee," Parsons continued. "[AOLTW Chairman] Steve Case and I have great confidence in their ability to get the job done, and we are pleased to have a great team in place as we move forward.

Added Case: "I look forward to working closely with Dick Parsons, Don Logan and Jeff Bewkes, as we revitalize AOL, enhance collaboration and innovation throughout AOLTW and deliver fully on the promise of this unique company. I also want to wish the best to Bob Pittman as he moves on. He was a critical part of AOL's growth and success over the past six years."

Logan was named CEO of Time Inc. in 1994 and Chairman in 1997, after assuming the presidency in 1992. According to AOLTW, Time Inc. has delivered 41 consecutive quarters of year-over-year earnings growth—averaging about 14% in compound annual EBITDA increases.

"I am excited by the possibilities of pursuing cross-divisional growth among AOL, Time Inc. and Time Warner Cable," Logan said."They all have direct subscriber relationships with consumers, and supplement those subscription revenues with advertising and other revenues. Together with the whole team, Jeff and I look forward to operating all of the company's businesses more efficiently and more effectively."

Bewkes joined HBO nearly a quarter century ago, becoming its CFO in 1986, President/COO in 1991 and CEO in 1995. During his seven-year tenure as CEO, HBO delivered compound annual EBITDA growth of 16% and increased its subscriber base from nearly 30 million to 38.5 million worldwide today. Under his leadership, HBO has become the world's most profitable TV network.Bada-bing.

"Don and I are committed to maximizing the value of each of our businesses by looking for innovative ways to generate new growth through divisional cooperation and exciting new technologies," said Bewkes. "Our entertainment and networks businesses are among the world leaders in their industries. And, as always, we will give our customers the best creative product in our respective businesses."

According to the company, Pittman and Logan will lead a smooth transition at AOL.

Said Pittman said: "I've decided that after a new CEO is in place at AOL, I won't return to AOL Time Warner as COO. 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. I'm proud of what we built at AOL and believe that it has a great future. Likewise, I have confidence in AOLTW's prospects. Most of all, AOLTW has great employees—the best I have ever worked with. I want to thank Steve and Dick, who have both taught me a great deal, and I look forward to working through this transition with them along with Don and Jeff."

Parsons added: "Bob Pittman is a brand builder and visionary, and a great manager and operating executive. In these few months as interim leader of AOL, he's re-energized its operations and taken steps to stabilize and refocus the business he played so important a role in building. He deserves to take a break, and has a very bright future at whatever point he decides to get back into the fray."

In related executive moves, Time Inc. EVP Ann Moore will replace Logan as Time Inc. Chairman/CEO, while President of HBO Original Programming Chris Albrecht will replace Bewkes as HBO Chairman/CEO. Bill Nelson, HBO's Executive VP in charge of Finance, Information and Operations Technology and Business Affairs, has been promoted to COO.

AOL shares closed down 66 cents at $12.45, near the stock’s 52-week low of $11.75; the 52-week high was $47.25. Today’s announcement came just as the NYSE closed.