AOL ready to be split up: report

Stephen Withers
Tuesday, 05 August 2008 12:58

IT Industry - Strategy

Time Warner has done the groundwork needed to split AOL's dial-up Internet access operation from its advertising and content business. However, with merger rumours involving Microsoft and Yahoo! already in the air, the question is who would be interested in buying what.

AOL's 2000 acquisition of Time Warner for $US164 billion was regarded as the high water mark of the dot-com boom. AOL Time Warner was renamed Time Warner in 2003, following a dramatic loss of value in the tech crunch. The company first mooted plans to sell the AOL division in late 2007.

According to the Wall Street Journal, Time Warner's primary motivation for the split in its AOL unit is to allow markets to place a more accurate valuation on the company's core advertising and content businesses.

The WSJ and other reports estimate that the advertising and content business may be worth between $US3 billion and $US4 billion, with $US2 billion to $3 billion for the cash-cow access business.

AOL has been involved in merger rumours recently, with reports that it would either be sold outright to Microsoft or merged with Yahoo!. It seems unlikely that either company would be interested in the dial-up business.

However, possible buyers include EarthLink, which claims its aggressive cost management and efforts to retain long-term subscribers (who require less support) allows it to achieve superior results.

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