Reports Trouble AOL Shareholders

AOL Time Warner shares fell Thursday following a report from the Wall Street Journal that Chief Operating Officer Robert Pittman is expected to leave the world's largest media company and a story in Washington Post saying parts of the company boosted revenue from unconventional deals.

AOL shares were sharply lower in early trading.

Pittman, who has been under fire for the failure of the AOL unit lately, is "expected to quit any day," the Wall Street Journal noted. A story in the newspaper citing people familiar with the matter said that AOL Time Warner's board is meeting Thursday and may consider promoting HBO Chief Jeffrey Bewkes and Time Inc. Chairman Don Logan.

In New York, AOL spokespeople didn't return a call seeking comment on the reports Thursday.

"He's gone," said Michael Holland, a New York money manager, speaking about Pittman. "People are saying he is drafting a letter of resignation. He has been identified with the bad stuff happening at AOL."

AOL has been the target of strong criticism by investors because its stock has dived 60 percent so far this year alone.

Citing confidential AOL documents and business partners, the newspaper said that AOL boosted revenue through the deals before and after the merger with Time Warner closed.

AOL said in statement to the Post that "the accounting for all of the transactions the Washington Post has discussed with AOL was appropriate and in accordance with GAAP."

AOL also said that "the transactions cited by the Post comprised less than two percent of AOL's revenues during the same period, and accounting for them differently would have had no impact on the Company's net income."

The Post said it reviewed deals that added up to $270 million revenue that represented a small portion of AOL's nearly $5 billion in ad and commerce revenue during the period reviewed from July 2000 through March 2002.

The Post concluded "without the unconventional deals, AOL would have fallen short of analysts' estimates of the company's growth in ad revenue (which is reported in a category that also includes revenue from commerce) in three quarters in 2000 and 2001."

By Emily Church & Jon Friedman