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AOL To Be Cut in Two

Time Warner’s new CEO Jeff Bewkes said this morning that AOL is being split in two.

Its web portal and advertising business will be separated from its nose-diving Internet access business, the operation that made AOL into a household and led Time Warner into one of the worst mergers in American corporate history. (Microsoft, take note.)

The move, which should take a few more months, it said, obviously puts AOL in play, raising speculation of a possible spin-off or sale.

Google, remember, beat Microsoft out for a 5% position in AOL.

Bewkes said, “We need to complete AOL’s business transition, and we’re working on separating AOL’s access and ad business so we can run them independently. This should significantly increase AOL’s strategic options.”

Bewkes also said Time Warner, whose Q4 earnings were down 41% to $1.03 billion on revenues up 2.4% to $12.6 billion, will cut spending by more than 15%.

AOL’s operating income was down 70% to $274 million on revenues of $1.25 billion, down 32%.

AOL still has 9.3 million access subscribers paying for what they could get for free, suggesting that even in Internet time news travels slowly.

On its web side, AOL attracted 109 million monthly unique domestic visitors on average in the December quarter and 49 billion page views.

CFO John Martin forecast AOL’s ad revenues this quarter will be “flat to down slightly,” expecting the pace to pick up in Q2. Income should be better then too because of those cost cuts, remaining close to 2007 levels.


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