NEW YORK — When AOL Time Warner Inc. delivered a host of bad news to Wall Street last week, the company softened the blow by delivering the message through its in-house diplomat: incoming chief executive Richard Parsons.

        Parsons doesn't officially take over running the company until May, when Gerald Levin retires as CEO. But the long Jan. 7 conference call to investors left little doubt that Parsons is now in charge of the world's largest media company.

        The task required Parsons' most notable skill — an almost uncanny ability to put people at ease during tense times. Despite his imposing stature at 6 feet, 4 inches, Parsons has an easy smile, a warm handshake, and a reputation as a cool mediator that has won him many friends in Washington and elsewhere.

        But there was no getting around the bad numbers that AOL doled out on Jan. 7. Among the company's confessions:

        • Earnings for 2001 will fall shy of previously stated goals.

        • The current quarter will have no earnings growth at all.

        • Earnings growth in 2002 will fall below previous forecasts.

        • An accounting rule change will oblige the company to write $60 billion off its balance sheet, to recognize the decline in the company's worth since AOL's merger with Time Warner was announced in January 2000.

        • AOL Europe, which is becoming a fully owned subsidiary, is losing much more money than many had thought.

        • The company is shutting down iPlanet, a joint venture with Sun Microsystems that had been making healthy contributions to profits.

        Why did AOL feel the need to come clean? Last year the company came under fire from investors for sticking by aggressive growth targets long after the economy tanked. Analysts became increasingly skeptical that the targets would be met.

        AOL originally forecast growth of 30 percent in 2001 for earnings before interest, taxes, depreciation and amortization, then eventually lowered the target to 20 percent. As it turns out, AOL disclosed on the call, it came in just shy of that goal with 18 percent growth.

        AOL also was expecting double-digit growth in earnings for 2002, but on the call it revised those targets lower as well, saying earnings could grow by as little as 8 percent and as much as 12 percent.

        On Wall Street, it's always better to underpromise and overdeliver. Now that the people who made last year's promises are no longer in charge, especially the chief financial officer, Wall Street is breathing a bit easier.

        “Last year we made certain economic assumptions and then ran right into a major advertising recession,” Parsons said on the call. “As a result, we got no credit for our achievements because of the high expectations we, ourselves, created. In fact, I think we were penalized.

        “Going forward, however, our assumptions regarding future economic conditions will be conservative,” Parsons said.

        Of particular importance to some investors was the replacement of AOL Time Warner's chief financial officer, Michael Kelly. Kelly had come from the AOL side, which built itself up by setting, and meeting, very aggressive growth goals with investors.

        In November Kelly returned to an operating role in AOL and was replaced by Wayne Pace, a well-liked Southerner who gained investors' trust as the CFO of Turner Broadcasting Systems, the broadcasting company founded by Ted Turner that includes CNN and TBS.

        Larry Haverty, a media analyst with State Street Research in Boston, says he “never took the overpromising seriously” and is relieved at the change in management. State Street owns 11.3 million shares of AOL Time Warner.

        Haverty said he was particularly disappointed by the surprise disclosures that AOL Europe was losing some $600 million a year, much more than many had expected, and that the iPlanet venture would be abruptly shut down.

        “It's a media company, and media people are in charge now,” Haverty said. “The Time Warner style of dealing with the Street is taking ascendancy over the AOL style, which doesn't work. ... I think the company had aggressive accounting and inadequate investor disclosure, and I think those things are going to change under Dick and Wayne.”

        Going forward, Parsons, who still technically shares the title of co-chief operating officer with Bob Pittman, will need his negotiating skills and extensive contacts in Washington. They are sure to become increasingly important as the company tries to pull its far-flung assets together and deals with a changing regulatory environment.

        AOL had been in the bidding for AT&T's cable assets, which Comcast Corp. eventually won, and would have faced a monumental regulatory challenge in getting the deal passed since the resulting company would have dwarfed its cable competitors.

        Even before the confessional call to investors, Parsons was already putting his negotiating skills to work. A few days before Christmas AOL announced that Ted Turner had signed a new contract with the company to stay on as vice chairman.

        Turner, an influential board member and the largest individual shareholder in the company, had been embarrassing AOL for months by publicly bemoaning the fact that he had been sidelined in the corporate hierarchy, saying that Levin had “fired” him.

        Turner has been known for raising a ruckus in the past, earning him a reputation as the “Mouth from the South.” Since Parsons was tapped to be CEO, however, Turner has been uncharacteristically quiet.

You create the boss you have
ECKBERG: Being CEO only partly about golf
Enron accountant under fire
Former Enron employees lash out
Morning Memo
The Success Coach
Promotions & new on the job
New AOL boss comes clean with investors