Report: AOL Spinoff Gains Support
Company denies published report, says it stands behind its Internet division.
Nancy Weil, IDG News Service
Spinning off the America Online Internet division from AOL Time Warner might not be such a bad idea, Steve Case has told senior company officials, according to a report published Tuesday in the New York Times.
Case, while head of AOL, brokered the company's monolithic acquisition of Time Warner, which was finalized in January of 2001 and cost AOL about $147 billion. Case, who left the role of company chairman this month, is said to hold little sway at AOLTW these days, following a stretch of difficulty after the merger failed to live up to its billing and the company's stock tanked.
Although Case has publicly continued to support the merger, the New York Times said that two senior officials, with whom he recently chatted about the topic of a spinoff say that he is speaking "favorably" of that notion now. The two officials spoke to the newspaper on the condition that their names not be used in print. The Times also reported that "long-time colleagues" of Case have said that he tends to talk out loud to discuss possibilities for the company "sometimes more provocatively than seriously," the newspaper said.
AOLTW had this to say about the story: "As we've been saying for months, the company is focused on turning around AOL and returning it to a growth track, not spinning it off," spokesperson Mia Carbonell said, reading a statement.
Case, through a company spokesman, declined to comment to the Times for its report.
Going Public?
Comments supposedly made privately by Case have tended to find their way into news reports about AOLTW, which has struggled since the merger to find its footing despite being the world's largest media company. Investigations into AOL accounting and business practices have been an issue, and AOL and Time Warner never have quite come together as executives had hoped.
"There's nothing in the story," Jupiter Research analyst David Card, who is based in New York, said Tuesday morning, adding that the news account merely says that Case has been talking about spinning off AOL--and Case is known to make such comments, which then wind up in print. "I don't think it's going to happen," Card said of the spinoff.
Apart from the little news nugget that Case has privately spoken favorably about a spinoff, the story is mostly a recap of what the New York Times and other news media have reported in the past about AOLTW, comments from Case, and Case's past and current role in the company.
Working Together
AOLTW has not achieved its potential in cross-media marketing, which needs to be more centralized, and has not fully integrated its two halves, Card said in commenting on the Times report. AOL's "very loyal customer base" is ripe for having Time Warner properties marketed to it. Overall, AOL and Time Warner are better off merged than separate.
AOLTW's vast stable of holdings includes Sports Illustrated, Time, People, Fortune, and dozens of other magazines, the Home Box Office cable channel, broadcasting ventures such as CNN and the Cartoon Network, and business divisions that make movies and musical recordings.
"The only thing it would do would be to let AOL focus," on its core Internet business, Card said of the spinoff. "If it was freed from Time Warner, what would it do" that isn't being done now? Not much, in Card's assessment, which means that spinning off AOL probably makes little sense.
