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The Thing Is: Steve Case - Time ticking away to dig AOL out of a hole

Investors now focus on the small things like making a profit and selling products. The old economy is the new black

Once upon a time, the internet was thought to be the sole conduit for the development of the human race. For most of the years 1999 and 2000, executives and investors thought our lives would change for ever, and so it was that any company associated with the internet found its market value soaring to astronomical levels.

Things are a little different now, and investors concentrate on the small things, like making a profit and selling products. The old economy is the new black and the new economy is ... well ... passé.

This tale explains the recent history of AOL Time Warner, the media multinational. Bang in the middle of the full thrust of the dot-com boom, AOL announced it would spend $100bn (£64bn) on buying Time Warner, whose cable network would allow AOL to get the internet into people's homes.

It took a long time for the deal to be approved. When it was first announ- ced, at the start of 2000, AOL founder Steve Case had to defend the decision to buy Time Warner, which was seen as a fuddy-duddy media company. Among the critics of the deal were Professor Michael Dertouzos at the Massachusetts Institute of Technology. "Content is only a small part of where the internet is heading," said Prof Dertouzos, who died before his logic could be shown to be flawed.

In such conditions it was obvious that AOL's directors were higher in the pecking order than the traditionalists at Time Warner. So Mr Case became the chairman of the combined company, as one of the most enthusiastic of the internet billionaires.

When he tried to persuade US regulators of the merits of the deal, he declared: "We believe our merger gives us the opportunity, and the responsibility, to help extend the benefits of the internet to every community around the world."

However, now that investors have had a two-year reality check, the situation looks a little different. The facts are that AOL only provides 22 per cent of sales and 19 per cent of underlying profits at the combined group. It is also the division that is at the centre of an investigation by the Securities and Exchange Commission over $49m of accounting irregularities.

It is not surprising that Mr Case has faced months of shareholder pressure to be removed from the job. Last week the newspapers were full of stories that he would go when the board of the company met on Thursday. He stayed on by the skin of his teeth.

But he does have extenuating circumstances that could have persuaded the board to give him another go. His brother, Dan, died earlier this year from brain cancer.

The talk is that Mr Case believes he can prove his worth between now and the annual general meeting in the spring. However, as a business leader who made his name in a boom, he has not proved he can manage the difficulties of an economic downturn, when media firms face falling advertising as well as less spendthrift customers.

If he can show his mettle in the space of six months he will have earned his position – but that is a daunting task for any chairman.

Heather Tomlinson