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The latest management change at AOL Time Warner's America Online unit has caused concern among shareholders on the eve of the company's first-quarter earnings release.
AOL named Robert Sherman as its new president of
interactive marketing, replacing Robert Friedman, who was
brought in to lead AOL's marketing 
efforts in August 2001.
Friedman was named senior vice president of corporate marketing.
Sherman, who previously was president of cable advertising sales at Time Warner, now will be in charge of advertising across all AOL divisions.
Advertising Trouble
Investors took the appointment, which came less than a year into Friedman's tenure, as yet another sign of trouble for AOL.
In the fourth quarter, AOL's advertising and commerce revenue fell 7 percent from the year-earlier quarter to $637 million. Analysts expect AOL will report a further decline when it releases first-quarter results after market close Wednesday.
"Based on the recent stock collapse, investors are expecting a bombshell from the company," Morningstar analyst George Nichols told the E-Commerce Times.
Lehman Brothers analyst Holly Becker expects the company will report a 17.1 percent decline in advertising and commerce to $1.7 billion for the quarter, along with a 25.8 percent decline in high-margin advertising to $535 million for the AOL division.
Subscription Slowdown
Subscriptions are also a concern. "Though the division's near-term financial challenges lie predominantly in advertising, the subscription business is also raising red flags," Becker said.
Becker added that she expects the AOL division to report a 21.4 percent boost in subscriber revenue to $1.8 billion for the quarter. Most of that projected increase, however, can be attributed to subscriber acquisitions in the fourth quarter.
According to Becker, subscriber growth slowed dramatically in the first quarter, dropping almost 50 percent from the fourth quarter to 975,000 net additions.
Management Shuffle
The replacement of Friedman with Sherman atop AOL's advertising division is just the latest in a string of management changes.
Jimmy de Castro, a former radio executive, was tapped to head AOL Time Warner's interactive services unit less than two weeks ago. Sherman will report to de Castro.
De Castro's appointment came on the heels of a management change that saw CEO Barry Schuler -- who had been running AOL since its merger with Time Warner in January 2001 -- replaced by Bob Pittman, who will become chief operating officer later this year.
Credibility Crunch
Those changes also are causing hand-wringing among investors. "Clearly, the recent change at the top of the AOL division suggests that results may be weaker than the company had thought when it laid out its projections in January," Becker said.
For now, analysts are hoping to get some candid guidance from the company during the earnings conference call.
"I'm hoping management will be forthcoming in the
conference call regarding all the firm's problems. The
management team has essentially lost all credibility
on Wall Street," Nichols said.
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