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AOL may announce reorganization

The company is reportedly expected to announce a reorganization that will dismantle AOL Studios and shift its focus and executive power.

America Online (AOL) is expected to announce a reorganization next week that will dismantle the company's AOL Studios online programming division and shift the company's focus and executive power, according to reports.

The reorganization, reported this morning by the New York Times and the Wall Street Journal, will consolidate the power of Robert Pittman, who heads the company's other main unit, AOL Networks.

According to the reports, AOL Studios will be dismantled and moved back into AOL Networks, and Pittman will be placed in charge of new content development. That area has been run by Ted Leonsis, currently president of AOL Studios.

An AOL representative declined to comment on the reports. Analysts also did not have the details.

While the news, if true, probably isn't great for Leonsis, it probably won't make much of a difference when it comes to the bottom line.

If anything, analysts called it a smart, if not obvious, move to bring all its properties under one heading.

"If it is true, what it means is the company is willing to grow the content business internally because it has the finances to do so," said Brian Oakes, an analyst with Lehman Brothers.

AOL Studios operates three properties, each with its own funding and investors. The idea is that each of them could be spun off. But in recent months, AOL has gotten cash-rich due to several deals it has made and can support the businesses itself.

It also could keep all the profits, should there be any. Sales managers also can join together rather than compete with each other for outside funding.

"It's a sign that the parent has gotten stronger and stronger," Oakes added. "This is the effect of the success the company is having."

The reports also say that AOL in recent weeks has been negotiating to sell a controlling interest in the money-losing AOL Studios to Bertelsmann AG and Madison Dearborn Partners for $200 million. The deal was called off because the Securities and Exchange Commission ruled that it would restrict the company from making acquisitions using its stock, the Times said, citing people familiar with the deal.