Time Warner steps closer to AOL split

Conglomerate is expected to announce that it has concluded the necessary internal processes to separate AOL's dial-up business from its Net advertising business, according to reports.

Marguerite Reardon Former senior reporter
Marguerite Reardon started as a CNET News reporter in 2004, covering cellphone services, broadband, citywide Wi-Fi, the Net neutrality debate and the consolidation of the phone companies.
Marguerite Reardon
2 min read

CNET News senior writer Dawn Kawamoto contributed to this report.

Time Warner has taken a step closer to splitting up AOL's business, The Wall Street Journal reported Monday.

Time Warner is expected to announce Wednesday that it has completed the internal process of separating AOL's dial-up Internet access business from its advertising business, the newspaper said.

Time Warner has been talking about splitting the company into two different entities for a while now. And it's been a main focus of Time Warner Chief Executive Jeff Bewkes, who took over as CEO seven months ago. AOL has long been viewed as a problem for Time Warner, as its dial-up business declines and its advertising business struggles to compete.

Time Warner has been examining several options with respect to splitting up the company, including selling off both pieces of the business or partnering with other companies.

But separating the business hasn't been as easy as it sounds as the company tries to figure out how to divide revenue, staff, and liabilities. Earlier, Bewkes had said he expected to have the process completed by the end of the second quarter. Time Warner will announce second-quarter results on Wednesday.

Once the separation of AOL's advertising-content and dial-up businesses is concluded, it may aid potential suitors like Yahoo and Microsoft in sizing up an offer price.

Yahoo reportedly turned to Time Warner and its AOL division as a potential white knight, after Microsoft announced its unsolicited bid for the company in February.

AOL has continued to talk with Yahoo as the on-again-off-again Yahoo-Microsoft buyout talks plodded along, and later expanded to involve a potential AOL-Microsoft deal.

In the past few weeks, the hubbub of an AOL-Yahoo, or AOL-Microsoft deal has quieted down, following a truce between Yahoo and its investor activist Carl Icahn, who was waging a proxy battle with the hope of pushing Yahoo and Microsoft to do a deal.

And in the latest AOL-Yahoo turn of events, Time Warner nixed any plans for former executive Jonathan Miller to serve on Yahoo's board, citing his no-compete clause.

EarthLink CEO Rolla Huff said last week when the company announced its second-quarter earnings that it is interested in buying AOL's dial-up business. He didn't give specifics, but he said that AOL's 8.7 million subscribers would provide a big revenue boost to the company. EarthLink currently has only 2.2 million dial-up subscribers.

Even though dial-up is a dying business, it still generates cash and a predictable revenue stream, which makes AOL's dial-up business particularly attractive to EarthLink and potentially other dial-up providers.