Why Time Warner-AOL merger failed
A sign on the AOL corporate headquarters in New York City.
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Kai Ryssdal: Attention, AOL... "You've got mail." Sadly, it's marked return to sender. After almost 10 years of trying to combine forces into an Internet-era powerhouse, Time Warner is going to spin off its AOL division. Our senior business correspondent Bob Moon explains why the much-celebrated media marriage never did work out.
BOB MOON: When giddy Time Warner and AOL executives sealed their deal at the very peak of the dot-com bubble, they couldn't seem to hold back on their self-congratulatory superlatives.
MONTAGE OF AOL EXECS: I don't think it's too much to say this really is a historic moment. From books to videos to financial services to travel to communications, you name it, the possibilities combining our brands are endless.
Even Time Warner board member Ted Turner, never known for his understatement, seemed to top himself that day, announcing his stamp of approval.
TED TURNER: I did it with as much or more excitement and enthusiasm as I did on that night when I first made love some 42 years ago.
Within months, the burst of the dot-com bubble left investors with billions in losses, and recently, Time Warner had searched in vain for a buyer for AOL.
What went wrong? For one thing, Time Warner took up a dial-up service just when Web surfers were switching in droves to high-speed. And Richard Morgan, assistant managing editor at The Deal, says the high price was wrong from the start.
RICHARD MORGAN: Back then a lot of people were drinking the Kool-Aid about the "new economy." When they announced that they were going to create the deal of the century, they put the value at $166 billion. Today, the market cap of Time Warner, which contains AOL, is only $28 billion. So that's a loss that's greater than 80 percent.
Morgan says it also put a long list of executives out of work.
MORGAN: It'd be hard to top this in terms of ruining both investments and careers.
Possibly ranking it, Morgan says, as the worst deal of the century.
I'm Bob Moon for Marketplace.