The Time Warner and AOL Breakup

Time Warner CEO told investors on a conference call on Wednesday that the company will split off AOL Internet-access service and eliminate 100 jobs.

The chief executive, Jeffrey Bewkes, said on a conference call that his goal was to increase the value of the company and the stock price on a long-term basis. Time Warner forecast earnings growth of as much as 9 percent in 2008. Ultimately, the company wants to separate AOL's dial-up access business from its growing online advertising-based business.

We need to complete AOL's business-model transition and are working on separating AOL's access and audiences business so we can run them independently, he said. This should significantly increase AOL's strategic options for each of these main business sectors.

Mr. Bewkes didn't clarify what those strategic options were exactly, but a spinoff or sale of part of or all of the AOL business has been bandied about for years. Of course, we are, as we always are, open to any strategic move that makes sense, he said.

AOL decided to shed its subscription internet-access-based business model two-years ago, in favor of offering free, ad-supported service, which Time Warner is calling AOL's audience business.

Time Warner reported that in the fourth quarter today, reporting that net income declined to $1.03 billion, or 28 cents a share, from $1.75 billion, or 44 cents, a year earlier, when Time Warner recorded tax and asset sale gains. Sales rose 2.4 percent to $12.6 billion, the company said in a statement.

At AOL, revenue dropped almost 32 percent to $1.25 billion from $1.84 billion for the year-prior period, as it continued to lose subscription revenue. Ad revenue rose 10 percent to $620 million.

The possibility of the company selling AOL became unclear last week when Microsoft Corp. made an unsolicited bid for Yahoo Inc. The move would not only eliminate two likely bidders for AOL, but also create a major online advertising power.

Google Inc. owns 5 percent of AOL and has a right to trigger an IPO of its stake in July. Google paid $1 billion in late 2005, valuing all of AOL at $20 billion. AOL's value today is far less certain.