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Time Warner mulls AOL spin off

Synergistic deal not so synergistic

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Plummeting revenues at AOL helped batter Time Warner's net income in the first quarter. In related news: Hey, anyone want to buy some red hot AOL stock? Anyone?

The media conglom told American regulators today it's considering selling off all or parts of its ailing AOL unit - but it did so an extremely ambiguous way that's easy to take back should it decide to.

"Although the company's board of directors has not made any decision, the company currently anticipates that it would initiate a process to spin off one or more parts of the business of AOL to Time Warner's stockholders, in one or a series of transactions," Time Warner said in a Securities and Exchange Commission (SEC) filing.

Not exactly solid details, but Time Warner chief Jeff Bewkes said during an earnings conference call Wednesday the company will announce the fate of AOL "very soon."

Consider this your free 90 day trial of the announcement.

AOL's $182bn purchase of Time Warner in 2000 was greeted by the cheerleaders of the dot-com tech bubble as heralding the perfect marriage of offline content and online media delivery. The deal, though, led to some record losses for the combined media giant over the past few years. Some even consider the merger one of the worst conceived in American history (accepting Texas into the Union not withstanding).

With AOL's subscriber base consistently dropping since 2002, the provider has struggled to redefine itself as an internet content provider while Time Warner was scratching its head over a good way bring up the idea of seeing other people.

Another nasty quarter for online advertising seems to have done the trick. AOL's ad sales slid 20 per cent in the first quarter to $145m. And that's coming from a 18 per cent drop in Q4.

Chatter about the two companies separating was renewed in March when AOL ousted its CEO in favor of Google's ex-sales chief Tim Armstrong.

Time Warner said Google notified the company in January that it was exercising its right to force Time Warner to take the internet unit public or buy back the search firm's five per cent stake in AOL it purchased in 2005 for $1bn.

Time Warner said it has the right, but not the obligation, to buy Google's interest with cash or shares. ®

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