Gordon Crawford's Bet Soured, So AOL's Case Had to Go (Update2)

2003-01-16 17:15 (New York)

(Updates stock values in 1st, 2nd, 16th and last paragraphs,

adds naming of Parsons as chairman today in 9th paragraph.)

Los Angeles, Jan. 16 (Bloomberg) -- Money manager Gordon

Crawford's holdings in AOL Time Warner Inc. shed $3.65 billion in

value since mid-2001, securities filings show, and he pinned a lot

of the blame on Chairman Stephen Case.

So it wasn't a huge surprise that Case resigned this week

after a four-month campaign by Crawford, senior vice president of

Capital Research & Management Co., the New York media company's

biggest investor with a stake worth about $4.59 billion. AOL

shares rose 6 cents today to $15.30.

Los Angeles-based Crawford has used his financial clout

before to make a point. In 2001, he dumped all his 66 million Walt

Disney Co. shares in displeasure over Chief Executive Michael

Eisner's performance.

``He's not afraid to flex his muscle,'' said William Harding,

a Morningstar Inc. analyst who covers American Funds. ``He's been

around the media block for more than 30 years.''

Crawford, 55, heads media investing at publicity-shy Capital

Research's American Funds, the third-largest fund company behind

Fidelity Investments and Vanguard Group with assets of more than

$333 billion.

``Capital Research and Management is a sea of anonymity,''

said Burton Greenwald, an independent fund consultant in

Philadelphia. ``They try very hard to submerge the individual.

He's the only one I could point to with a high profile.''

Crawford, who doesn't give interviews, has a proven record as

an investor. Growth Fund of America, his biggest fund at $34

billion, has beaten more than 97 percent of other growth funds for

the past three, five and 10 years, according to Morningstar. It

fell 22 percent last year, faring better than 87 percent of such

funds Morningstar tracks.

`Personal' or Business?

Though AOL weighed down Crawford's fund, Steve Case suggested

the fund manager also had a ``personal'' reason for pushing him to

resign.

``I think he was more emotional about it because his son

works at one of our divisions,'' Case said in an interview. AOL

Time Warner's board today named CEO Dick Parsons to succeed Case

as chairman when he steps down in May.

Few believe parental concern over son Jeffrey, 35, a Warner

Bros. sales executive, swayed Crawford, who declined to comment.

``I don't think this was over me,'' said Jeffrey, who has worked

at Warner Bros. since 1996.

Crawford joined Capital in 1971 after graduating from the

University of Virginia's business school, focusing early on media

stocks and the cable-television industry in its infancy.

``He knows the business incredibly well,'' said Michael

Burns, vice chairman of Lions Gate Entertainment Corp., a

Vancouver-based film studio. ``He's one of the great media

investors of all time.''

Money Talks

Like other managers at American Funds, Crawford has shown

he's a long-term investor. ``When he takes a position, he takes a

real position,'' said Burns, whose company is now 7.7 percent

owned by Crawford's funds. ``He doesn't just buy a few hundred

thousand shares, he really gets involved.''

His actions at AOL Time Warner demonstrate as much. Crawford

advocated the AOL Time Warner merger in January 2001, according to

people familiar with the situation, and promoted Ted Turner's

earlier sale of his Cable News Network to Time Warner.

Crawford first asked Case to resign last August, a person

familiar with the situation said. AOL Time Warner stock hit a four-

year low of $8.70 on July 25 after the company said regulators

were investigating America Online's accounting for some

advertising. He and Turner, AOL Time Warner's vice chairman,

indicated they'd vote against Case as chairman at the next

shareholder meeting in May, the person said.

Determination

In June 2001, when AOL traded at $53, Capital Research held

96.8 million shares worth $5.13 billion. Those shares are now

worth $1.48 billion, a $3.65 billion drop. Crawford continued

buying as the shares fell: he more than doubled his stake to 300

million shares in the six months ended Sept. 30, according to

Securities and Exchange Commission filings.

``AOL's clearly been a dent in the performance of their

funds,'' said Harding, noting that Crawford and his company like

to buy out-of-favor shares. ``At American Funds, they'd hold them

forever if they could.''

Crawford had iron-willed determination even as a youth, said

older brother Duncan, a former Wall Street trader. As a prep

school freshman and would-be hockey goalie, Gordy Crawford fielded

his brother's best shots for hours in their parents' garage in

Greenwich, Connecticut.

``He could barely see the puck as it came in,'' said Duncan.

``He got pretty beat up, but hung in. He wanted to learn. He was

like a human backstop.''

Taking a Bow

It might have provided training for life as a fund manager.

``The last couple of years, he's gotten whacked just like

everybody else,'' said Lions Gate's Burns, who meets Crawford once

a quarter to go over long-term plans. ``Gordy's view is, you stick

to your knitting and you pound away.''

In addition to Turner and John Malone, chairman of Liberty

Media Corp., Crawford's associates over three decades of financing

media businesses now range from USA Interactive Chairman Barry

Diller to Viacom Inc.'s CEO Sumner Redstone and President Mel

Karmazin.

For his part, Case accepts some blame for AOL Time Warner's

woes. ``At the end of the day, I was the architect of the

merger,'' he said. ``The stock price went down -- I take credit

for that.''

By that yardstick, Crawford can also take a bow. After Case

announced Sunday that he was resigning, AOL shares rose 42 cents

this week -- giving the company's biggest investor a paper gain of

about $126 million.

--Aaron Pressman (617) 338-5822 or at apressman@bloomberg.net in

the Boston newsroom and Randy Whitestone and Kim Chipman in New

York. Editor: Kessler.