This is clearly a good deal for Arianna Huffington who I am pretty sure owns a meaningful piece of the Huffington Post and it will further accelerate the HuffPo's reach and put her in charge of an even broader portfolio of content. It is also likely to be a very good deal for the early investors, in particular Ken Lerer who I believe did the seed round, but also for Greycroft and Softbank. Maybe less so for OAK which invested $25 million at the end of 2008 (although a very nice IRR for sure). This got done as an all cash deal so nobody has to bet on AOL stock.

Other likely big winners in the deal are co-founder Jonah Peretti and investor Bob Pittman (who was personally involved in a $5 million round in 2007). It's unclear at this point whether bolting on another megablog site will help Aol find solid footing in the editorial space, but hey, at least that's one less giant competitor to worry about.

mtaylor [at] observer.com | @mbrookstaylor

"These women are starved for information, but they don't need to be bothered with too much," Mr. Pittman told The Wall Street Journal. "The kiss of death is when you get an email or find something on the web and someone says, 'I'll read it later.'"

The brand will launch with a party at the R Lounge in Times Square this evening. Whoopi Goldberg and Candice Bergen will appear as representatives of the trendy, older woman PureWow hopes to connect with.

Those are two classy ladies, to be sure. But they are also kind of strange representatives for an email targeting women "over 35". Golberg is 54 and Bergen is 64. Basically PureWow is saying, once you pass 35, it's like you're already golden.

--Randal A. Nardone, co-founder and COO of Fortress Investment Group, and his wife, Melani, sold their apartment at the Heritage at Trump Place at 240 Riverside Boulevard for $9 million to Sylvain Mirochnikoff and his wife, Xena Warrior Princess actress Rebekah Mercer. The "sprawling" open-floor-plan, river-view four-bedroom was listed by Corcoran's David Chang. Mr. Mirochnikoff, an exotic equity derivatives trader at Morgan Stanley, and Ms. Mercer currently own the apartment above the Nardones' double-unit condo, which would suggest the couple plan to combine the two floors. Filed: 4.19.10

--New York Apple Tours president Hayim Grant sold his apartment at 157 East 74th Street to the Leichtman/Levine Living Trust for $4.495 million. The seller's father, Harry Grant, a New Jersey developer, pioneered the idea of bringing bright red British double-decker buses into Manhattan as tourist lures—it worked. The apartment, "a serene and tranquil" three-bedroom with a grill-equipped terrace, was listed by Corcoran's Robert Browne, Chris Kann and Gregory Sullivan. Filed: 4.16.10

--Internet investor Bob Pittman, a founder of MTV and former head honcho at AOL Time Warner, paid $2.2 million for the 1 York Street apartment of Mark Barnes, COO of St. Jude Children's Research Hospital, and pyschiatrist John Grimaldi. The two-bedroom, 2.5-bathroom with wide-plank oak flooring was listed by Prudential Douglas Elliman's Jason Karadus and Jason Amirian. Filed: 4.16.10

--Stephen and Susan Olderman sold their apartment at 45 Gramercy Park North to Edwin and Vivian Fancher for $3.975 million. The triple-mint renovated apartment comes with a much-coveted key to Gramercy Park. Warburg's Judith Thorn and Joy Grossman had the listing for the 9-foot-ceilinged three-bedroom. Filed: 4.19.10

cmalle@observer.com

"I told him he was making a big mistake running around the world for [former C.E.O.] Jerry Levin, saying he could grow [earnings] by 30 percent," recalled Mr. Silverman. "The company was too big to do that over a sustained period of time. I predicted he would be shot someday for being the messenger of a message that could not happen."

Later that year, while the two men were hanging out at Mr. Silverman's house in the Hamptons, Mr. Pittman told his friend that Mr. Levin was leaving, and that he would become chief operating officer and Richard Parsons would become the new C.E.O. "He said, 'Isn't that great?'" said Mr. Silverman. "I said, 'No, it's not. You should leave. When you're not the C.E.O., you leave.' He said, 'It looks like I lost.'"

Incredulously, Mr. Silverman replied, "Hel-lo! You lost!"

And yet Mr. Pittman stayed on-only to be warned again six months later, as it became clear that AOL was the revenue-dragging albatross of the biggest media debacle in history. According to Mr. Silverman, "I said, 'You have to leave, because you're going to get blamed for all this. Tell Dick [Parsons]. By the summertime, you'll be fired.'

"If you weren't in the middle of all this," Mr. Silverman added, "it was easy to see."

On Thursday, July 18, Bob Pittman-the Mississippi minister's son turned sermonizer of synergy-finally resigned from his post as chief executive officer of America Online. Eleven days before, a report in The New York Times had depicted an "open revolt" against Mr. Pittman, with Time Warner executives sharpening their daggers for a Shakespearean finale to the failed merger scheme penned by Mr. Levin and Steve Case in early 2000. But Mr. Pittman's friends and close associates tell a different story, with Mr. Pittman as a political naïf facing an intractable culture of Time Inc. princes who resented the newcomer's efforts to pry open their velvet coffin and plug them into the AOL mainframe. They said Mr. Pittman's aversion to hardball infighting-and his dogged belief that he could make the merger work-ultimately did him in. Friends complained that Mr. Pittman was ushered out with a slew of bad ink spouting from disgruntled staffers in the Time & Life Building. In the process, they said, those antagonists managed only to flatten their stock options even further.

Mr. Pittman, of course, isn't anyone's idea of Mr. Nice Guy. He's typically described as arrogant and detached, a no-bullshit salesman seen by the option-poor Time Warner folks as a high-rolling Mark Cuban–type who'd already cashed in on the boom-$66 million in the last year alone-and who continued to sell snake oil after the jig was up and the stock was down more than 70 percent. By continuing to sell Mr. Levin's and Mr. Case's vision of cross-platform advertising synergies, Mr. Pittman's role as hatchet man-the guy sent to do the dirty work and make the dream a reality by forging partnerships between divisions-was a good enough reason to turn the ax against him. "The first person a salesman sells is himself," noted a high-ranking executive at AOL.

A spokesman for Mr. Pittman said that he wasn't doing interviews at this time. But associates of Mr. Pittman said their friend was unfairly cast as Lucifer in what Time Warner execs liked to dub "AO-Hell." "The merger was not his idea," insisted Myer Berlow, a close associate of Mr. Pittman's and the former president of global marketing solutions at AOL, who was himself spanked in a recent Wall Street Journal article about the failed sales schemes he and Mr. Pittman cooked up. "He was chosen to be the C.O.O., to fulfill the promise of the merger," Mr. Berlow said. "He is not 'Bob Pitchman.' He didn't make it up; he never lied to anyone; he never overpromised."

Across the board, associates of Mr. Pittman pointed to the House of Luce as the epicenter of leaks and spin that produced a rabid anti-Pittman campaign in the press. The Times published perhaps the most damning article of all on Sunday, July 7, with the headline "A Media Giant Needs a Script." Written by David D. Kirkpatrick and David Carr, it described an "open revolt" against Mr. Pittman, specifically from Time Warner executives. While no one pointed directly to Time Inc. chief Don Logan as the source, there was widespread belief among AOL-ers that lieutenants of Mr. Logan's used the press to send Mr. Pittman out with a malign flourish. Said one AOL executive close to Mr. Pittman, "I hope when we get Al Qaeda, and Osama bin Laden is hung in the square, that The New York Times' enthusiasm is half as gleeful as it was for AOL's comeuppance."

In fact, the July 7 story may have been the final blow. Over the July 4 weekend, Mr. Pittman was still undecided about leaving-"and then the [Times] story ran," said the executive close to Mr. Pittman. "I suspect that any last doubts about leaving vanished about 9 a.m. Sunday morning."

Lack of Character?

As for the Time Inc. executives who may or may not have leaked the story: "It's pussy behavior," said a high-ranking AOL executive, who also adamantly fingered Time Inc. as the source of much of the press. "When things are bad, that's when you shut up, suck it up and make it better. These are times that define people's character. And I found their character wanting."

Apparently, the onslaught of negative stories puzzled Mr. Pittman. A close friend said that Mr. Pittman told him on July 19, "I don't understand why these guys want to trash me and the company. If my being shit on puts 20 points on the stock, I can understand that. But they're trashing the company to where their own options are being sunk even further."

While Time Inc.'s Mr. Logan certainly wanted a more decentralized management that would allow the division autonomy from Mr. Pittman's synergistic Advertising Council, one Pittman supporter said executives below Mr. Logan were simply trying to preserve a culture of status at Time Inc. Mr. Berlow recalled the long lines of black cars lined up to received Time Warner executives every day-company excess that was anathema to Mr. Pittman, he said.

"Time Inc. is run by a much deeper cultural need, and that need is one of status," said Mr. Berlow. "If you've worked at Time Inc. you know that's what it's about. Bob didn't understand this. You want to get a car service? It cost $22-just buy it. He didn't get that. It was particularly anathema to somebody like Bob, who's involved in cost-cutting.

"We're always accused of being more flashy," Mr. Berlow continued, speaking of AOL's reputation as a bastion of private-jet millionaires, himself among them, "but I can't imagine Bob taking people out to a restaurant and spending $1,000 for a bottle of wine. He would just think that was a sin."

Others said that Mr. Pittman was actually oversensitive to the Time Inc. culture, because he was well aware of the fact that their stock-option plans were in his hands. "He was very sympathetic and understanding to people who had a different compensation scheme, who felt they'd been screwed," said a close associate of Mr. Pittman's. "But then he had a point of view that we're all screwed. And secondly, he was trying to make everybody wealthy. Sometimes you have a winning lottery ticket and sometimes you don't."

Most describe the downfall of AOL Time Warner as a combination of the dot-com meltdown, a decline in advertising and the self-inflicted wounds resulting from internal battles. Certainly the advertising decline destroyed the amped-up dreams of AOL as the growth engine of the company. Along the way, sales and marketing executives within the various divisions-Time Inc., Warner Bros. Studios, Turner Broadcasting-resented the bundling of advertising established by AOL dealmakers, like Myer Berlow. A July 18 article in The Wall Street Journal described Mr. Pittman and his team's alleged attempts to centralize ad sales as alienating to advertisers and account managers at various Time Warner divisions. The article "was 100 percent at odds with the truth," claimed the executive close to Mr. Pittman. "Bob worked to get all the advertising representatives to cooperate with one another, but was never an advocate of centralized ad sales."

A source close to the AOL Time Warner board of directors told The Observer that Mr. Pittman's attempts to forge partnerships between Time Warner companies and America Online were weakened because Mr. Parsons' democratic style as C.E.O. didn't allow Mr. Pittman to execute the increasingly unpopular strategies. For Mr. Pittman, the burden of being the operator for other leaders took its toll. "[He] was told to go do X-Y-Z," said the close friend of Mr. Pittman's. "And the Time Warner guys would say, 'I don't want to do that.'"

And when he turned to Mr. Parsons for support, the friend said, he didn't get it: "Bob didn't have the stroke from Dick. Had Dick given him the ability to perform, he'd still be there. He would have hung in there and tried to make it work."

And Mr. Pittman appeared to have little stomach for politics, however. >From the beginning of the merger, friends said that Mr. Pittman, as co-C.O.O. of the entire company along with Mr. Parsons, was charged with the untenable task of making Time Warner executives happy while also hitting the numbers promised by himself and Mr. Levin. Some associates urged him to use any means necessary, including dictatorial force, but Mr. Pittman demurred. "The instructions we were given were, 'Do not push them,'" said Mr. Berlow. "'Get the results, but don't get them bent out of shape.' My feeling is, I couldn't get results doing it his way.

"In some ways, he was unbelievably naïve," added Mr. Berlow. "But it wasn't naïveté-he just thought that good would win out. He's a Methodist minister's son."

But by last spring, after he'd been sent to Dulles, Va., to fix AOL, Mr. Pittman told his friends that he was tired of beating his head against the wall while being constantly lambasted in the newspapers. "If I had to describe his emotion, it was frustration," said Mr. Silverman.

But if Mr. Pittman was frustrated, friends said his cool personality didn't allow him to vent openly or retaliate in kind. "In some ways, he's an odd personality," said Mr. Berlow. "I don't think he would turn to Veronique"-his wife, an online graphic artist-"and say, 'I'm not getting a fair shake.' He knew the press was going to be awful."

But not all of Mr. Pittman's supporters have remained completely loyal after some of that awful press, especially the revelations that AOL executives may have performed improper accounting to meet revenue targets. The AOL executive who originally called Time Inc.'s alleged leaks "pussy behavior" said that he, for one, had reformed his views. "My point of view matured," he said. "When you see it all laid out like that, you understand that it's offensive."

Still, he said, "It's not personal, in the end. It's just bidness."

Levin with a thrilling vision that new-era growth would propel the merged

company far into the next decade, Richard Parsons, the C.E.O.-designate for AOL

Time Warner, formerly declared the dream dead.

It happened on Jan. 7, in a State of AOL Time Warner conference

call. "We expect revenue and EBITDA [industry parlance for 'cash flow'] growth

for the first quarter to be essentially flat ,"

Mr. Parsons said, putting extra emphasis on the last word. "Last year, we made

certain economic assumptions and ran right into a major recession," he

continued. "As a result, we got no credit for our achievements because of the

high expectations that we ourselves created. Going forward, our assumptions

about the economy will be more conservative. It simply is not prudent to

forecast the economy in a volatile world."

Bob Pittman, now the chief operating officer–designate for AOL

Time Warner, was sitting right next to Mr. Parsons during the call, and he

might well have cringed. For it was he and his fellow AOL alumnus, chief

financial officer J. Michael Kelly, who throughout 2000 and most of 2001 had

peddled a slick 30 percent growth message to an all-too-gullible Wall Street

community. AOL Time Warner was different, Mr. Pittman smoothly assured

investors as Internet and technology companies keeled over left and right. They

had 140 million–oddsubscribers-andthegreat growth engine itself in Dulles, Va.,

was still sucking in $23.90 apiece per month from 50 percent of logged-on

America.

Wall Street, though, caught on fast. A recession was a recession,

and AOL Time Warner, the biggest media company in America, couldn't be immune.

On the sell side, analysts downgraded their numbers. Merrill Lynch's

influential cable analyst, Jessica Reif Cohen, started the trend on Oct. 17

when she revised her rating on the company to neutral from buy-to the barely

suppressed ire of Mr. Kelly and Mr. Pittman. Even the queen of cheerleaders,

Morgan Stanley's Mary Meeker, took down her numbers last week; she maintained

her strong buy rating, of course, but raised some blunt questions about the

sustainability of the AOL growth model. The stock, at $32 and change, was an underperformer-far off its pre-merger high of

$91, and the province of short sellers far and wide.

So yes, the mood on the conference call was dour. Indeed, Mr.

Parsons, Mr. Levin and the newly appointed C.F.O., Wayne Pace, seemed eager to

get on with it and put up as gloomy a picture as possible. First off, they

would take a $60 billion charge to earnings in the first quarter, reflecting

the difference in the price that AOL paid for Time Warner in January of 2000

and the sharply reduced value of its assets now. They would also pay close to

$7 billion in cash to Bertelsmann in order to buy out their former partner's

stake in AOL Europe-which, it was disclosed, was losing $600 million a year.

And to top it all off, the forecast for revenue growth for the year would be a

snail-like 5 to 8 percent.

All of this dire news was delivered by C.E.O.-designate Mr.

Parsons and his doleful new C.F.O., Mr. Pace-both of whom are Time Warner men.

Mr. Parsons, a longtime Gerald Levin ally, has been a Time Warner board member

since 1991, and Mr. Pace is a former finance man for Turner Broadcasting

Systems.

The deep rumble of Mr. Parson's boardroom baritone set an

appropriate tone for the evening. Yes, here was a man who knew how to present

the hard facts of life. A protégé of Nelson Rockefeller, a member of Sanford I.

Weill's Citigroup board and President Bush's favorite media guy-he co-chaired

the President's Commission to Strengthen Social Security-the 6-foot-4 Mr.

Parson more than fills up a corner office with his gravitas. Even his choice of

words seemed apt for the moment: " Going

forward, we will be more conservative ….

It simply is not prudent " (a word few AOL executives have been heard to

utter). Blunt and reassuring, the tenor of Mr. Parson's remarks were in sharp

contrast to Mr. Pittman's; the only AOL representative on the phone call, Mr.

Pittman devoted most of his time to spinning reasons as to why AOL Time Warner

didn't hit its numbers.

"The advertising recession was the drag on our company's earnings

for 2001," he said. "If we had had just half

of the advertising that we had in the year 2000, we would have easily hit our

original guidance of 30 percent EBITDA growth for 2001." No doubt about it: Bob

Pittman is a man who is used to hitting his numbers, and one senses that he

still can't believe he missed them. But here's the thing: to plead if only is disingenuous to a fault. He

and his team were dishing out their forecasts as the advertising recession

built up before them like a massive tidal wave. As AOL's chief operating and

market executive, it was his job to see it coming and adjust his forecasts

accordingly-something he and his growth-obsessed AOL gang did not (and perhaps

could not) do.

Following Mr. Levin's surprise resignation, there was some

speculation that Mr. Parson's tenure at the helm would be a short one, and that

Mr. Pittman-now in charge of all the operating units-would shortly replace him,

finally concluding AOL's takeover of Time Warner. But the opposite now seems to

be the case. AOL's core dial-up Internet business has matured, while the small

pockets of growth to be found within the company are coming from Time Warner

units like the high-speed Internet services at Road Runner and the success of

movies like Harry Potter and the

Sorcerer's Stone and Lord of the

Rings , which between them have taken in a half-billion dollars domestically

so far.

In fact, the two major pieces of bad accounting news this week

hark directly back to AOL and its bygone glory days. The $60 billion charge

recognizes the fact that the AOL stock used to buy Time Warner was ludicrously

overvalued. And the contractual agreement to pay billions to Bertelsmann for

full control of an entity that bleeds a half-billion a year in losses follows

as well from a deal struck by AOL during the peak days of Internet fever.

In fact, there were many who felt that Mr. Levin's

resignation-particularly in view of the $60 billion charge-was his way of

saying Yes, I was seduced by those

snake-oil salesmen from Dulles. Steve Case put one over on me: AOL stock was

never worth 90 bucks, 70 bucks or even 50 bucks . Indeed, a recent report by

Morgan Stanley attaches a fair value of only 38 dollars to the stock. But all

the same, Mr. Levin got the last laugh: While Mr. Case remains ceremonial

chairman, it will be Jerry's man, Mr. Parsons, running the company. In Dick

Parsons, he has appointed a C.E.O. in perfect chime with dour economic times. A

realist and an accommodator who's as comfortable at a Lincoln Center opening as

he is lobbying regulators in Washington, a personal friend of a popular

President as well as of powerful Federal Communications Commission chairman

Michael Powell, Mr. Parsons is perfectly positioned to lead AOL Time Warner to

the next stage.

"I am 100 percent committed to the strategic vision that drove

Steve Case and Jerry Levin to fashion the merger of AOL Time Warner in the

first instance," Mr. Parsons stated

Monday. Fair enough-but it was never his deal to begin with, and what the

conference call this week brought into sharp relief is that the deal itself was

a drastically mispriced one.

Those who fashioned it-Mr. Levin and Mr. Case-are now in retreat;

those who hyped it-Mr. Pittman and his crowd-are still breaking a sweat. But

it's the man who inherited it, with realism and cold assessment-Dick

Parsons-who, for the time being, owns the AOL Time Warner stage. And it would

be genuinely surprising if he exits it anytime soon..

mounted a podium at the Millennium Broadway Hotel in Times Square and started

in on a speech to a hall packed full of investors. The host was J.P. Morgan,

and Mr. Levin-fresh off the company jet from business in China, and then the Harry Potter premiere in London-was

earthtone-attired in post-merger AOL Time Warner wear: a tweed jacket, thick

denim shirt and slipper-like suede shoes.

Mr. Levin-a suit-and-tie man if ever there was one-may well have

embraced the casual AOL Friday culture, but the message he had for the investor

community that day was not the message that had been previously coming from the

world's largest Internet company.

He spoke softly into the microphone. AOL Time Warner, he said,

"operates as a public trust as well as for our shareholders. I will provide

whatever resources necessary to CNN, NY1, to all the magazines; I will do

whatever it takes. And I'm not interested in hearing what happens to margins

with respect to these expenses. Things," he said, "have really changed."

He then paused and said:

"And it is a profound change."

The rest of Mr. Levin's presentation was skewed heavily towards

Time Warner's upcoming film slate: Harry

Potter and the Sorcerer's Stone was positioned to be a smash, Ocean's 11 had massive star power, and

Jim Carrey was going sentimental in The

Majestic . In terms of growth in its other businesses, like advertising,

subscriptions and AOL itself, there was little guidance given. Mr. Levin

focused on content, on responsibility and on service. The message was clear.

For any investors who were confused, Mr. Levin's message was: It's a new world, and AOL Time Warner has a

new mission-get used to it.

"I'll keep using this phrase 'public trust,'" Mr. Levin said

after his speech. "It was like that at Time. I'm the C.E.O., and this is what

I'm going to do. I don't care what anyone else says."

Gerald Levin, who about two years ago agreed to have his company

taken over, has done what Gerald Levin seems to do: He took over the takeover.

A philosopher-prince of the American media establishment, he was certain of his

function in the new universe, a fact that was confirmed by the vast events of

this autumn. Before Sept. 11, AOL Time Warner was a media monster trying to come to terms with its post-merger persona.

Following the events of Sept. 11, AOL Time Warner was no longer an Internet

company. It is now what it originally was in 1923, when another man on a mission-Henry

Luce-slapped together the first issue of Time

and began selling punchy, character-driven stories to an American public

starved for concise information, jaunty attitude and the embodiment of a

revolutionized age. When Time Inc. merged with Warner Bros. in 1989, the great

mythologizers of the media merged with the mythmakers. With the addition of CNN

and eventually the AOL deal, the power of the company became its ability to

report, create, tell, analyze and deliver the American story globally as no other

entity can. And as the Internet dissolved into the rest of the media-and was

financially and culturally brought down to size as just another delivery

system-the great storytelling company became more Time Warner AOL than the

other way around.

And after Sept. 11, Gerald Levin had an immediate perception: His

company had the capability to report, create and deliver the American story at

a moment when it was needed more than it had ever been.

His ability to comprehend and oversee those parts of the company,

from news to entertainment, made his the

cultural influence on AOL Time Warner-not chairman Steve Case's, not co–chief

operating officer Bob Pittman's, but Gerald Levin's. Coming up on the two-year

anniversary of what was once perceived as the AOL hijacking of Time Warner, the

62-year-old Mr. Levin is driving the monster. At the time of the merger, those

who knew Mr. Levin warned the uninformed not to underestimate him. And they

were right. He had a focused perception of his company's strengths, and now

he's using them.

As in the conciseness of this statement at the J.P. Morgan

conference: "I like movies," he said. "And now, what is most important to

people, besides news and information, is storytelling." It was as though Luce

had become a Warner brother.

Mr. Levin, as well as all

other AOL Time Warner executives, declined to comment for this story,

but the Jerry Levin revival shouldn't come

as a surprise. He is the great boardroom survivor of his era. In the early

70's, he was a young cable executive running HBO for Chuck Dolan. He ended up

at Time Inc. when it took over the company, while Mr. Dolan, his boss and HBO's

founder, landed in the Long Island suburbs with a few thousand cable

subscribers. Somehow, the diminutive, sometimes bemused-looking Mr. Levin

outlasted them all.

Now Mr. Levin is lopping off more corporate heads, as he's been

doing for more than a decade now. He ran roughshod over Warner Bros.'

management in the early 1990's; in 1992, he fired nine directors on his Time

Warner board; and in the past year, he's nosed down the khaki-clad AOL Internet

interlopers from Dulles, Va. Some executives see a little bit better in a dark

time, and Mr. Levin is one of them.

He has endured difficult times in the past, which may have

steeled him to keep his head: He lost his 31-year-old son Jonathan to a

murderer four years ago. On another plane, he lost $100 million in a 1994

investment in interactive television in Orlando, Fla. And as a man who has

fired hundreds of employees over the years, he understands the value in

dispensing the ugly truths. His attitude is in sharp contrast to the giddy,

boomtown-growth promises that AOL executives became schooled in making to

investors. Mr. Pittman and his chief financial officer, Mike Kelly, both from

AOL, talked a silky-smooth game to Wall Street-$40 billion in revenues, 30

percent growth in cash flow, etc., etc.-but they were the last pixilated

Panglosses of the Internet era, and their exuberance was junked after Sept. 11.

Earlier this month, Mr. Kelly was removed from his corporate post

in New York and rotated back to AOL headquarters in Dulles, a few days after a Wall Street Journal article had him

yelling profanities at two high-profile Merrill Lynch analysts who had

downgraded AOL Time Warner stock. His replacement, Wayne Pace, is a Time Warner

man.

And this August, Glenn Britt, an almost 30-year Time Warner man

and longtime associate of Mr. Levin, was named the chief executive of Time

Warner's cable unit. Before that, WB Network founder Jamie Kellner was given

Turner Broadcasting Systems. "I have a habit, and this will continue, of making

constant changes with people," Mr. Levin said on Nov. 9. "Like some managers

like to change margins; I like to change

people." Cross-fertilization, Mr. Levin calls it, and now with a

distinctive Time Warner aroma.

"If you look at all the big job changes, they have all gone to

Time Warner people," said one senior investment banker. "Jamie Kellner, Glenn

Britt … they didn't bring in AOL people for any of those positions. And then

there's Mike Kelly. You can argue that has been a failed attempt at

cross-fertilization." More and more, it seems, the competition with AOL seems

to be shifting in favor of Time Warner executives. And it happened just as Wall

Street awoke to the fact that the pie-in-the-sky promises made by AOL were not

going to happen.

That's not news: In a brutal media recession, many companies

downgrade their growth forecasts. But Mr. Levin took another approach. When a

company refers to itself as a "public trust" and suggests that the exigencies

of its corporate mission may well supersede its commitments to shareholders, it

steps onto another plane. Somehow, Mr. Levin summoned enough nobility and

gritty pomp to exalt his company's purpose. It's a message that could only have

come from a tough executive steeped in his company's tradition. He looked at

AOL Time Warner and chose to promote service, integrity, uplift-all at odds

with the narcissistic message of the "You've Got Mail!" revolution.

Not that Mr. Levin's statement of a public trust is

self-sacrificing.

"Now that the Internet stuff has proven to be fiction, Jerry and

the Time Warner people are going back to the businesses that make money," said

one senior investment banker familiar with the inside workings of the company.

" Harry Potter will make money, music

will make money, cable will make a shitload of money, as will Turner and WB.

This was a great company. For the AOL guys to come in and say 'We are the

future of media and you guys are old news' irritated a lot of people. Now

people are saying, 'You know what? There is no such thing as Internet

advertising.'"

Nevertheless, AOL's cash flow-expected to be $3 billion this

year-is nothing to sniff at.

Two years ago, it all seemed so different. In late 1999, when Mr.

Levin and AOL C.E.O. Steve Case started batting around ideas, Mr. Levin was

under pressure from the Street to develop an Internet strategy. Time Warner had

stopped growing, and more than needing a growth injection, Mr. Levin needed a

crew that could sell Wall Street on the idea of infinite growth. Mr. Case,

along with his president, Mr. Pittman, and his C.F.O., Mr. Kelly, had done this

brilliantly, producing one whiz-bang growth quarter after another. Investors

bought the message, shooting the AOL stock from $2 in 1997 to $91 and change by

January 2000. That was seductive to Mr. Levin, then Time Warner's C.E.O., whose

relationship with Wall Street had always been fraught with assorted tensions.

Despite cable growth, Time Warner was burdened with billions in debt and could

never produce the AOL-style triple-digit growth rates that left traders and

fund managers wet with joy. So Mr. Levin cast his lot with a bunch of

fortysomething Internet wizards-much as he'd done in 1989, when he gambled on

his ability to survive with smooth-talking Warner boss Steve Ross.

Throughout much of 2000 and 2001, Mr. Pittman, named co–chief

operating officer with Time Warner's Richard Parsons, was AOL Time Warner's

primary voice when it came to wooing the Street. Responsible for the company's

growth engine, subscription businesses such as magazines, cable and AOL (Mr.

Parson's brief covered content, such as films and music), Mr. Pittman sold the

product. Forty billion in revenues for

2001, I promise, he assured all who questioned how this great beast of a

company could grow its cash flow at 30 percent in the midst of the biggest

media recession in over 10 years.

His C.F.O., brash, forceful Mr. Kelly, echoed the same mantra.

But even before Sept. 11, it had become clear that AOL, with its maturing 32

million–strong subscriber base, just couldn't grow as fast as it once did.

Growth was leveling off and advertising was down. Like General Electric,

Wal-Mart and other great American companies, AOL was not immune to a recession,

contrary to Mr. Pittman's assertions. When the company announced its

third-quarter results on Oct. 17, it became more evident that the growth trend

was downward. There would be no $40 billion in revenues and no 30 percent

growth in cash flow. At $37, the stock is well off its 52-week high of $58.

"This is a company that historically has had a grand notion of

its growth rate," said Doug Kass, a hedge-fund investor who's been an active

and vocal short seller of the stock. "Levin recognizes now that there is still

a pre-bubble mindset amongst AOL executives, and what he is trying to do is

graciously bring expectations in line with a post-bubble world." Not that Mr.

Pittman's position within the company is in jeopardy-his infighting skills

remain strong. For example, while Mr. Britt, the new cable C.E.O., may be a

Levin guy, Thomas Baxter, formerly of the cable company Comcast, and John

Billock, from HBO, are Bob Pittman men. With Mr. Case having removed himself

from any day-to-day operating responsibility, Mr. Pittman remains the most

senior and powerful of the AOL executives-responsible for over 70 percent of

the firm's cash flow.

Beneath him are a series of hard-charging fortysomething deal

makers: David Colburn, head of business development, an entertainment lawyer

responsible for AOL's banner-ad deals; Ken Lerer, in charge of communications,

formerly a New York magazine writer

and AOL's primary P.R. consultant; Barry Shuler, C.E.O. of AOL and the online

maven.

These four men, together with Mr. Case, made AOL what it is

today, and in the woozy days of the merger in January 2000, they not only

landed the peachiest of positions, they came to symbolize the young,

aggressive, deal-driven ethos that had allowed AOL shareholders to assume a 55

percent majority stake in the company. Throughout much of this year, however,

all have been big sellers of AOL Time Warner stock. Mr. Colburn has sold

roughly $8 million; Mr. Lerer, about $20 million; Mr. Pittman, some $55

million. Mr. Kelly has sold almost $15 million and Mr. Case, almost $120

million. And the selling could well pick up in January, when the last batch of

pre-merger AOL options vest.

Mr. Levin, on the other hand, has sold not a share during the

same period. Indeed,  outside of charity

and tax purposes, Mr. Levin has sold hardly any stock at all during his time as

C.E.O.-a fact that, with his tortoise-like, take-the-long-view perspective,

distinguishes him from his AOL co-workers, as well as from the Street as a

whole. Let the kids sell out; now is the time for gravitas and grown-ups, men

whose riches span decades, who can give ease and comfort to a board of

directors.

Which is why many AOL Time

Warner–ologists say the grip that Mr. Levin, along with the 53-year-old

Mr. Parsons, has on the company's reins is getting tighter by the day. "Pittman

is a great guy and a great manager, but when it comes down to it, his job is ad

sales," says one banker. "The guys who are really running the business now are

Parsons and Jerry."