AOL CEO Tim Armstrong had almost a year to understand AOL's business and outlook prior to taking the company public.
But he still made the worst mistake a newly-public CEO can make.
In the first quarter out of the box, Tim delivered a nasty surprise: He announced that AOL's future performance would be worse than expected, screwing his first investors and hobbling hope that a new era had finally come to AOL.
AOL's revenues are collapsing, and a turnaround will take years. Tim did a good job of preparing Wall Street for that reality prior to the IPO. What Tim did not do well was convey just how long and sustained the collapse of AOL's core business was going to be.
This may have been because Tim and the rest of AOL's managers were not prepared well by their underwriters and communications teams (who should have told them to set expectations so low that the company could fall over them). Or it may be that Tim & Co. had no idea how bad this year was going to be. Neither instills confidence.
Wall Street likes to get the bad news now and the good news later. What Wall Street hates, meanwhile, is to get bad news as a surprise.
One hopes that Tim and his team have now learned their lesson the hard way and that the lousy outlook the company provided is, finally, a worst-case scenario that sets the bar just above the floor. If not -- if the next quarter brings yet another nasty surprise -- the remaining believers Tim won over on the IPO roadshow will dump the stock in the trash and head for the hills.
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