AOL to Separate from Time Warner

Time Warner has finally decided to spin off AOL after years of speculation, a move that was announced earlier in the week and whose final details are now official. Time Warner originally bought AOL as an online outlet for its other divisions but it hasn't worked out as planed. AOL will be spun off in a separate entity that will be openly traded on the market.

Time Warner wanted to get rid of AOL for a while now and rumors have been around for years. There were some attempts to sell it to Yahoo and Microsoft but in the end none of them came through. This has left Time Warner with just one alternative, namely to separate from AOL and leave it to its own devices. There are still a few problems to be worked out, like the fact that Google owns five percent in AOL, but Time Warner will buy Google's share before it can complete the transaction. It will also have to make a lot of internal changes to sever all the ties that bind them together. When it's all complete, Time Warner shareholders will all get shares in the newly formed AOL company.

Time Warner Chairman and Chief Executive Officer Jeff Bewkes said, “We believe that a separation will be the best outcome for both Time Warner and AOL. The separation will be another critical step in the reshaping of Time Warner that we started at the beginning of last year, enabling us to focus to an even greater degree on our core content businesses. The separation will also provide both companies with greater operational and strategic flexibility. We believe AOL will then have a better opportunity to achieve its full potential as a leading independent Internet company.”

At the time, Time Warner's merger with AOL was huge, the company created becoming the largest media corporation in the world. But AOL was already declining and while it has seen a steady stream of income, its revenue has declined over the years. Its biggest earner, the dial-up business, has shrunk over the years, ceding market share to broadband. Now it has only 6.9 million subscribers – down from 26.7 million – which account for $2 billion yearly, of which, apparently, $1 billion is pure profit for AOL.

AOL Chairman and Chief Executive Officer Tim Armstrong was optimistic about the move: “This will be a great opportunity for AOL, our employees and our partners. Becoming a standalone public company positions AOL to strengthen its core businesses, deliver new and innovative products and services, and enhance our strategic options.”