Time Warner Splitting Up AOL Amid Losses
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Originally published at 1:30 p.m., February 6, 2008
Updated at 3:24 p.m., February 6, 2008
Time Warner said today it is splitting its AOL division into an online advertising unit and a dial-up access unit, a move many analysts expect could lead to the sale of the access business.
It was the first announcement of plans for AOL by new Time Warner chief executive Jeff Bewkes. He is under shareholder pressure to increase the company's stock price and resolve AOL's future. The advertising unit, called Platform A, has been growing steadily, but not enough to offset losses in the access unit, which is hemorraging subscribers.
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"We're working to separate AOL's access business from its higher growth audience, communications, community and ad platform businesses," Bewkes said in a conference call. "We think it will take several more months because it's fairly complicated. ... It's one of our top priorities."
He did not comment specifically on whether AOL would seek to sell off the dial-up business.
"As for strategic options, it's simply always a good idea to align your businesses in terms ... [of] where your efforts are with where the growth possibilities are and that's really what we're doing. In doing that, it provides the most advantaged position for any of our operations should they need to make some kind of arrangement with other companies," Bewkes said
Fourth-quarter sales at AOL dropped 32 percent as it lost 740,000 customers for its service that provides traditional dial-up Web service. Operating profit at AOL declined 70 percent. Fourth-quarter ad sales grew 10 percent
Bewkes addressed the news of Microsoft's $44.6 billion bid for Yahoo. Some analysts have said the potential deal denies AOL's two of its more likely suitors, though the actual impact is muddied by the fact that Time Warner has been spending heavily to beef up the advertising unit, and it's not clear Microsoft, Yahoo or anybody else would be interested in the dial-up business.
"One thing we should point out, it does underscore the value of Internet properties with large audience," Bewkes said. "It does have a beneficial lift, really, to the value of our eyeballs ... because they're going to be more vibrant competitors for search and as we said, I think it just verifies the importance of moving to the kind of display and third-party monetization platform that we've built."
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America Online
In April 2007, AOL President and Chief Operating Officer Ron Grant addressed the media in Bangalore, India. (FILE PHOTO) (Dibyangshu Sarkar/AFP/Getty Images)
AOL Chairman and CEO Randy Falco speaks during the Reuters Global Technology, Media and Telecoms Summit in New York on May 16, 2007. (FILE PHOTO) (Keith Bedford/Reuters)
AOL Chairman and CEO Jonathan Miller along with AOL Vice Chairman Ted Leonsis -- who is the majority owner of the Washington Capitals, Washington Mystics and minority owner of the Wizards -- met with The Washington Post to discuss AOL's new business model in 2006. (FILE PHOTO) (Leslie Walker/Washington Post)
An employee walks through one of the doors inside the lobby of AOL headquarters in November 2004. (FILE PHOTO) (Joe Raedle/Getty Images)
This 2006 photo shows the annual company volunteer day at AOL headquarters in Dulles. AOL employees packaged more than 2,000 bags for The Red Cross, Loudoun Family Services, Loudoun Literacy Council, and Emmaus Services for the Aging in D. C. (FILE PHOTO) (Tracy A. Woodward)
YouthAIDS Global Ambassador Ashley Judd spoke to more than 300 America Online employees at the company's headquarters in 2005 to promote HIV/AIDS education and prevention. (FILE PHOTO) (Tim Nguyen/AOL)
AOL and Advertising.com executives gather at AOL headquarters in 2004 to talk to the media. The companies announced that AOL had agreed to pay $435 million to acquire Advertising.com, a provider of interactive marketing services. In photo, left to right: Advertising.com CEO Scott Ferber; Advertising.com Chief Product Officer John Ferber; AOL Vice Chairman Ted Leonsis; AOL Chairman and CEO Jonathan Miller. (FILE PHOTO) (Rick Kozack for AOL)
The photo for this illustration was taken in New York in 2006. Here, a collection of compact disks containing promotional software for AOL's Internet service is shown. (FILE PHOTO) (Mark Lennihan/Associated Press)
In 2003, then-Virginia Gov. Mark Warner speaks during gathering at AOL headquarters in Dulles prior to the ceremonial signing of an anti-spam bill. Shown listening to Warner is, from left: AOL executive Ted Leonsis; president of the Northern Virginia Technology Council, Bobbie Kilberg; Virginia Attorney General Jerry Kilgore and Virginia State Rep. Jeannemarie Devolites. (FILE PHOTO) (Rich Lipski)
This 2002 photo shows the outside of AOL headquarters in Dulles. (FILE PHOTO) (Kenneth Lambert/Associated Press)
In this Dec. 11, 2001 photo, Robert Pittman, chief operating officer of AOL Time Warner, presents his keynote address to Internet World Fall 2001 at New York's Javits Convention Center. (FILE PHOTO) (Richard Drew/Associated Press)
This photo taken Feb. 29, 2000, shows AOL Chairman and CEO Stephen Case, left, and Time Warner Chairman and CEO Gerald Levin as they prepare to testify before the Senate Judiciary Committee in Washington, D.C. about the merger of AOL and Time Warner. (FILE PHOTO) (Mario Tama/AFP)
AOL CEO Gerald Levin is shown speaking before the House Commerce Telecommunications Subcommittee in Washington in this September 27, 2000 photo. (FILE PHOTO) (Brendan Mcdermid/Reuters)
In this 2000 photo, Steve Case, left, Chairman and CEO of America Online, hugs Gerald Levin, Chairman and CEO of Time Warner, following a press conference in New York during which the two companies announced that AOL would buy Time Warner for about $163 billion in stock. At the time, the merger was considered to be the biggest business deal in history. (FILE PHOTO) (Mike Segar/Reuters)
This 1999 photo shows James V. Kimsey, founding CEO and Chairman Emeritus of America Online. (FILE PHOTO) (Philip Bermingham Photography)
In this March 13, 1995 photo, Microsoft CEO Bill Gates, left, and America Online CEO Steve Case address the Microsoft Professional Conference for the Internet. (FILE PHOTO) (Lou Dematteis/Reuters)
Signs inside the lobby of AOL's Dulles headquarters are seen in this 2004 photo. (FILE PHOTO) (Joe Raedle/Getty Images)
The lobby inside AOL's headquarters is seen in Dulles. The firm, which is owned by media giant Time Warner, has seen its number of subscribers shrink in recent years amid fierce competition. (Joe Raedle/Getty Images)
Bewkes said he does not envision a change in strategy's for AOL advertising unit, which is meshing sales of ads on AOL-branded Web sites with third-party sales on Web sites such as Facebook.
John Martin, Time Warner's chief financial officer, warned that advertising may not grow as robustly in the coming months because of the loss of a large advertising client.
Bewkes also said Time Warner is reevaluating its ownership in Time Warner Cable, a separate public company in which it owns most shares, and looking at other ways to save costs.
This report originally appeared on The Washbiz Blog on washingtonpost.com.
Tagged: AOL, business_news
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