Time Warner plans to split AOL
Time Warner has completed the complex book keeping work necessary to move ahead with proposed plans for splitting AOL's internet access business from its content and advertising business, according to a Wall Street Journal report. The report says the move is expected to be announced on Wednesday, along with Time Warner's second-quarter results.
Time Warner is considering various possibilities for AOL, including potentially selling off one, or both of the parts of AOL's business, but such plans have been kept from further crystallising, in part because of uncertainty over the value of the unit's two complementary revenue sources, which have always been closely intertwined. For instance, the company has been in talks with both Yahoo and Microsoft over the content and advertising aspect of AOL's business, while US ISP Earthlink has been suggested as a possible buyer for AOL's internet subscriber base, which far outnumbers Earthlink's own. Earthlink chief executive Rolla Huff last week said the company would be interested in buying the internet business. While in a gradual decline in recent years, AOL's internet service is still a steady source of profit. Earthlink has 2.2 million internet subscribers to AOL's 8.7 million.
Jeff Bewkes, who took over as Time Warner chief executive seven months ago, said this spring he had begun the process of separating AOL's internet and content businesses for accounting purposes, and had hoped to complete it by the end of the second quarter, though, according to the Journal, it took about a month longer. The separation involves separating revenues, staff and liabilities, which could allow Time Warner to better spotlight the value of the advertising and content businesses.
In recent discussions with Yahoo, AOL has been valued at about $10bn (£5bn), excluding the internet business, but some analysts cited by the Journal said the advertising and content business could really be worth only about $3bn to $4bn, based on Time Warner's current stock price.
According to the report, Time Warner is considering possibilities for the internet business after concluding talks over the advertising and content arm, with possibilities including a sale to Earthlink or a securitisation, allowing Time Warner to raise money based on the business' anticipated cash flow. The report states the internet business is estimated to be worth $2bn to $3bn, but could be worth more in sales talks because of its predictable revenue stream.