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By Diane Seo

June 24, 2000 | America Online and Time Warner shareholders arrived at simultaneous meetings Friday armed with gushing praise for their respective head honchos and quivering anxieties that a merger of the two companies would pulverize their mega-moneymaking streaks.

AOL shareholders in Vienna, Va., seemed particularly unnerved by AOL stock's descent since the company announced the merger with Time Warner in January. Several attendees demanded assurances from AOL CEO Steve Case that consummation wouldn't decimate share value -- after all, AOL agreed to a premium price for Time Warner in the all-stock deal, now valued at $122 billion. Pre-merger, AOL traded at about $73; the stock closed Friday at about $53, down more than $3 for the day and down $43 from December's high.

Such a drop might not fluster ordinary stockholders -- especially given the recent wild fluctuations on Wall Street. But these aren't any shareholders -- these are investors who have seen a $10,000 investment in AOL three years ago grow to roughly 150 grand!

The concern is that AOL won't grow as fast yoked to the mammoth Time Warner -- at least not like the explosive days of yore. Still, of the 40 analysts who track the stock, 37 made a "buy" rating. And next month, AOL is expected to report fiscal fourth-quarter earnings of 11 cents a share, up from the 6 cents reported in 1999.

Powering ahead on the earnings front might win analysts' support. But there's only one way companies can win shareholders' favor: by making them money.

"I would like a clarification about how this merger is going to really benefit AOL stockholders right now," one woman asked Case at the meeting. "I understand what you're saying about the Web scene changing and all that, but I would like a clarification about who's going to benefit here."

In response, Case blamed AOL's slump on an overall slide in the technology sector. "The stock price sometimes goes up and down and doesn't necessarily have a logical correlation to the success of the business," he said. "AOL, since we announced the merger, as of last night was down 23 percent. It's obviously disappointing, but you've got to look at it in the context of what's happening in the market overall."

Meanwhile, the Time Warner gathering in New York turned out to be much more of a lovefest. One speaker likened the firm's financial performance in recent years to hitting a grand slam. "You brought men home on first, second and third," the elderly shareholder told CEO Gerald Levin, who basked in an embarrassing round of applause.

Still, Susan Schein, whose retirement portfolio is largely invested in Time Warner stock, seemed to speak for many in the room when she asked Levin whether she'll soon be able to quit working.

Levin -- who revealed that his entire net worth is tied up in company stock -- nearly violated Securities and Exchange Commission rules about touting one's own stock with his bullish comments that shares have risen at an annual average of 17 percent over the past decade.

"I won't make predictions," Levin said, joking that his general counsel was starting to look nervous. "But obviously I believe in the future of AOL Time Warner ... I can't make recommendations -- but hold on to your stock."

The merger "is a way of accelerating the growth of both companies," he added.

After the meeting, Schein said the impending merger makes her nervous. She has counted on Time Warner stock's doubling every few years. "I don't know if it can keep doing that, but I like the fact that [Levin] has his entire portfolio in the stock. That comforted me, but of course he has many, many, many more shares than I do."

Time Warner shares -- which were trading near $70 before the merger was announced -- climbed as high as 105 1/2 in March, before retreating to its current price of about $77. The stock remains up 26 percent for the year, Levin said.

Despite worries over share price, stockholders of both companies overwhelmingly approved the merger, which now must be cleared by U.S. and European regulatory agencies.

One man home, two to go ...

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