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AOL and Time Warner splitsville by end of the year

Grabbing Google's 5% first

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Time Warner and AOL will divorce at the end of the year, just as soon as the internet unit buys its stock back from Google.

AOL plans to do its online services and advertising gig solo, leaving Time Warner to focus on media and cable.

But first, Time Warner said it needs to repurchase the 5 per cent stake in AOL currently owned by Google. The US media conglom expects to repurchase Google's piece in the third quarter, giving Time Warner complete control of AOL's fate.

The spin off has been churning at AOL for many months now, and was signaled back in February with a filing to US regulators.

Time Warner CEO Jeff Bewkes said in a statement:

We believe that a separation will be the best outcome for both Time Warner and AOL. The separation will be another critical step in the reshaping of Time Warner that we started at the beginning of last year, enabling us to focus to an even greater degree on our core content businesses. The separation will also provide both companies with greater operational and strategic flexibility. We believe AOL will then have a better opportunity to achieve its full potential as a leading independent Internet company.

Thus ends one of the most ill-fated mergers of the dot com bubble. AOL's $182bn purchase of Time Warner (and not the other way around) in 2001 was pitched as the perfect blending of offline content and online media delivery. But pre-broadband internet technology combined with a business culture class resulted in AOL never really becoming a useful pipeline for Time Warner content. AOL's subscriber base has steadily eroded since 2002 as more and more customers migrated to broadband providers. By 2003, AOL Time Warner officially dropped the "AOL" from its name.

This March, Google's former US sales boss Tim Armstrong was tapped as AOL's new chief executive and "the right executive to move AOL into the next phase of its evolution."

Armstrong said in a statement today:

This will be a great opportunity for AOL, our employees and our partners. Becoming a standalone public company positions AOL to strengthen its core businesses, deliver new and innovative products and services, and enhance our strategic options. We play in a very competitive landscape and will be using our new status to retain and attract top talent. Although we have a tremendous amount of work to do, we have a global brand, a committed team of people, and a passion for the future of the Web.

But AOL is no longer the youthful cock of the walk that it was the last time the company was independent. Getting the AOL namesake to actually attract "top talent" nowadays is going to be a major trick – short of the world switching to post-apocalyptic currency of AOL free trial disks. ®

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