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Time Warner Announces AOL Split

The widely rumored AOL split from Time Warner will become a reality next year. In a release announcing the company’s second quarter earnings, Time Warner CEO Jeff Bewkes said the company will split its AOL access and media units.

Sales at AOL fell 16 percent to $1.06 billion in the quarter; profit slipped 36 percent to $230 million. While ad sales increased by 2 percent, that wasn’t enough to offset the loss of 604,000 subscribers, according to Bloomberg.

Bewkes did not say that the company plans to sell AOL altogether, but some in the industry are expecting such an announcement soon, writes CNET.

AOL has been a burden on Time Warner since its internet-access business began to wither some years ago. 2008 saw aggressive attempts to trim AOL’s fat and highlight its potential as an online ad leader: news that its internet and ad divisions would be divided were first announced in February. Since then, its online ad networks consolidated, and niche websites launched to attract advertisers, MarketingVOX writes. In March AOL also purchased Bebo, a major social network in the United Kingdom.

The AOL business is valued at $2 billion to $3 billion by analysts, but Time Warner will likely pursue more than that if it sells. Despite its decay, AOL still hosts 8.7 million dial-up subscribers. (Earthlink, the second-largest dial-up provider, serves a distant 3.3 million — including broadband and web-hosting customers.) Time Warner’s revenues dropped 16 percent in the second quarter, to $1.1 billion. Net income fell to $792 million, from $1.07 billion last year. Time Warner Cable, which Time Warner spun off in May, grew faster than the rest of the company, with an increase in revenues of 7 percent. 214,000 more people have subscribed to its triple play of cable TV, broadband internet and telephone service.

Chris Marangi, fund manager at Gamco Investors Inc., called the cable network’s advertising business “relatively healthy. It’s benefiting disproportionately from the shift in dollars from broadcast to cable.”