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Business Briefing

Negatives Aside, AOL CEO Posts Positive Results

Negatives Aside, AOL CEO Posts Positive Results
February 14, 2014 9:36AM

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Since taking charge in April 2009, AOL chief executive Tim Armstrong has revived an ailing company known for its 1990s era dial-up Internet service and its "You've got mail" slogan. But Armstrong often makes headlines for appearing brusque and indifferent to AOL employees, even firing a high-ranking staffer during a meeting.

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AOL chief executive Tim Armstrong isn't one to mince words. Over the weekend, he apologized for insensitive comments and backtracked from an unpopular plan to pay matching retirement fund contributions in a lump sum at the end of the year. Armstrong had previously defended the proposal by citing the high cost care for two "distressed babies" born to employee families.

It wasn't the first time Armstrong made headlines for appearing brusque and indifferent to employees. Last summer, he abruptly fired a high-ranking staffer during a meeting in which about 1,000 employees participated via conference call.

Why does Armstrong still have a job? Since taking charge in April 2009, he has revived an ailing company known for its 1990s era dial-up Internet service and its "You've got mail" slogan.

"The stock has tripled since 2012. From an investor perspective, the stuff Tim says they are going to do, he does," says John Blackledge, an analyst at Cowen & Co. What he's done with what he was given, he adds, "is excellent."

The former Google advertising chief was hired to supervise AOL's separation from Time Warner -- a union that is widely viewed as one of the worst mergers in history. His next task: Oversee AOL's transformation from an Internet provider that subsists on subscription fees to a content company that makes most of its money from advertising. Although the work is still underway, he has largely succeeded.

"He certainly has taken AOL and moved it in a new direction," says Rita McGrath, professor of management at Columbia Business School. McGrath says, "from a shareholder perspective, he has stabilized the company. For a long time they were very lost."

McGrath adds that it's unlikely AOL's board will look to replace Armstrong any time soon, even with his human relations errors. Blackledge, meanwhile, thinks the headline-grabbing comments have "no bearing" on Armstrong's management of the business.

Here's a look at Armstrong's missteps and accomplishments:

MINUS

Reaction to Armstrong's "distressed baby" comments, made during a conference call with employees, was swift. The mother of one of the babies wrote a heart-wrenching, yet measured response on Slate.com last weekend. Armstrong apologized and reinstated the old benefits plan in which the company matches employees' retirement fund contributions on a per pay period basis.

PLUS

AOL recently recorded its strongest quarterly revenue growth in a decade. The company grew revenue by 13 percent in the final three months of 2013, to $679 million from $599.5 million in the same period the year before. (continued...)

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