Time Warner may finally spin off AOL

Time Warner Inc. (TWX) today announced that it may spin-off AOL (the parent company of this blog), effectively undoing one of the more controversial corporate mergers in recent history.

The 2001 merger of AOL and Time Warner was hailed at the time as the ideal combination of old and new media, creating a synergy-driven hybrid that would grow for years. As critics from Wall Street analysts to billionaire Carl Icahn pointed out, though, the merger never lived up to the original hype.

Shares of the New York-based company, which reported strong quarterly earnings, soared in pre-market trading.

"Although the Company's Board of Directors has not made any decision, the Company currently anticipates that it would initiate a process to spin off one or more parts of the businesses of AOL to Time Warner's stockholders, in one or a series of transactions," the parent company of Warner Bros., Time magazine and CNN said in a 10-K filing with the SEC. "Based on the results of the Company's review, future market conditions or the availability of more favorable strategic opportunities that may arise before a transaction is completed, the Company may decide to pursue an alternative other than a spin-off with respect to either or both of AOL's businesses. "

The company also is in talks with Google Inc. (GOOG) about buying back the five percent stake in AOL it acquired in 2006.

Revenue at AOL in the first quarter decreased 23 percent to $867 million, due to a 27 percent decline in subscription revenues and a 20 percent decrease in advertising revenue. Operating Income decreased 47 percent to $150 million. During the quarter, AOL had 106 million average monthly domestic unique visitors and 58 billion domestic page views, according to comScore Media Metrix, which translates into 181 average monthly domestic page views per unique visitor.

Overall, net income at Time Warner fell 14 percent in the first quarter to $661 million, or 55 cent a share, from $771 million, or 65 cents a year earlier. Revenue dropped seven percent to $6.9 billion.
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