Time Warner Sheds AOL

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• May 28, 2009

time_warner_logoAfter spending nearly a decade trying to build a new-age media empire, Time Warner is spinning out AOL as a separate Internet company run by former Google advertising executive Tim Armstrong. He was hired in March to try to revive the brand once known as America Online. Time Warner owns 95 percent of AOL and will buy out Google’s 5 percent stake during the third quarter. Around the end of the year AOL will be spun off into a separate publicly traded company.

The $147 billion deal in which AOL bought Time Warner in 2001 became a disastrous corporate combination. In 2002 and 2003, Time Warner absorbed nearly $100 billion in charges to account for the diminishing value of the combined company, eventually dropping AOL from its corporate name. Much of AOL’s original revenue came from providing dial-up access, a business that peaked for AOL in 2002 at 26.7 million subscribers. The rise of broadband ate away at that business, and AOL had just 6.3 million dial-up subscribers at the end of the last quarter. AOL laid off thousands of employees to try to streamline, but after a few strong quarters, ad growth slowed and then began declining.

“We believe AOL will have a better opportunity to achieve its full potential as a leading independent Internet company,” Time Warner Chief Executive Jeff Bewkes said in a statement.

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