Time Warner Splitting Up AOL Amid Losses
By Zachary A. Goldfarb
Time Warner said today it is splitting its AOL division into an online advertising unit and a dial-up access unit, a move many analysts expect could lead to the sale of the access business.
It was the first announcement of plans for AOL by new Time Warner chief executive Jeff Bewkes. He is under shareholder pressure to increase the company's stock price and resolve AOL's future. The advertising unit, called Platform A, has been growing steadily, but not enough to offset losses in the access unit, which is hemorraging subscribers.
"We're working to separate AOL's access business from its higher growth audience, communications, community and ad platform businesses," Bewkes said in a conference call. "We think it will take several more months because it's fairly complicated. ... It's one of our top priorities."
He did not comment specifically on whether AOL would seek to sell off the dial-up business.
"As for strategic options, it's simply always a good idea to align your businesses in terms ... [of] where your efforts are with where the growth possibilities are and that's really what we're doing. In doing that, it provides the most advantaged position for any of our operations should they need to make some kind of arrangement with other companies," Bewkes said
Fourth-quarter sales at AOL dropped 32 percent as it lost 740,000 customers for its service that provides traditional dial-up Web service. Operating profit at AOL declined 70 percent. Fourth-quarter ad sales grew 10 percent
Bewkes addressed the news of Microsoft's $44.6 billion bid for Yahoo. Some analysts have said the potential deal denies AOL's two of its more likely suitors, though the actual impact is muddied by the fact that Time Warner has been spending heavily to beef up the advertising unit, and it's not clear Microsoft, Yahoo or anybody else would be interested in the dial-up business.
"One thing we should point out, it does underscore the value of Internet properties with large audience," Bewkes said. "It does have a beneficial lift, really, to the value of our eyeballs ... because they're going to be more vibrant competitors for search and as we said, I think it just verifies the importance of moving to the kind of display and third-party monetization platform that we've built."
Bewkes said he does not envision a change in strategy's for AOL advertising unit, which is meshing sales of ads on AOL-branded Web sites with third-party sales on Web sites such as Facebook.
John Martin, Time Warner's chief financial officer, warned that advertising may not grow as robustly in the coming months because of the loss of a large advertising client.
Bewkes also said Time Warner is reevaluating its ownership in Time Warner Cable, a separate public company in which it owns most shares, and looking at other ways to save costs.
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