Peter Kafka

Recent Posts by Peter Kafka

Ghosts of AOL, Lehman Visit Time Warner in $25 Billion Write-Down

Yes, this economic collapse is different than the dotcom blowup. But there are some similarities.

For instance, in 2002, Time Warner had to take a $54 billion write-down connected to its disastrous AOL deal. Today, the company has announced a $25 billion write-down, which is in part connected to… its disastrous AOL deal.

To be fair, most of that charge has nothing to do with AOL, but with problems in its cable business; spin-out company Time Warner Cable (TWC) announced a $15 billion write-down of its own. But while Time Warner doesn’t elaborate on the charges in its release–it just says they are “related to goodwill and identifiable intangible assets at the Cable, Publishing and AOL segments”–I’m told that some of the write-down does indeed relate to the original AOL deal from eight years ago.

Other problems at Time Warner aren’t of its own making: The company says it will also take a hit of $50 million to $60 million from a “restructuring of a lease for space in the Time & Life Building, held by a lessee who recently declared bankruptcy.” That tenant, I’m told, was Lehman Brothers.

In any case, as astonishing as these numbers look in print, they don’t have much to do with Time Warner’s performance as a company, in the present tense. But Time Warner had worrisome news on that front, too: “The economic environment has proved somewhat more challenging than the Company previously expected, particularly for the advertising businesses at the AOL and Publishing segments.” Sigh.

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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik