Time Warner To Spin Off AOL To Stop The Bleeding Of Cash

It was announced this morning that media giant Time Warner will buy the 5% of AOL that it doesn’t already own so that it can spin it off as a separate company:

After the proposed separation is complete, AOL will compete as a standalone company ā€“ focused on growing its Web brands and services, which currently reach more than 107 million domestic unique visitors a month, as well as its advertising business, which operates the leading online display network that reaches more than 91% of the domestic online audience. AOL will also continue to operate one of the largest Internet access subscription services in the U.S.

This basically ends a marriage made in hell from the perspective of both companies. At the height of the dot.com boom, they merged in January of 2000 and was the world’s largest ISP at the time with plans on ruling the world. Since the merger, the value of AOL has dropped significantly from its $240 billion high. Its subscriber base has not grown since 2002 as high speed Internet became popular, and they have since become a content provider similar to companies such as Yahoo as opposed to an ISP. Now it’s a major cash drag on Time Warner, which is why they want to spin it off.

Seeing as their revenues dropped by 23% last quarter, I expect the bleeding to continue for AOL. But at least Time Warner won’t be affected.

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