AOL Spinoff From Time Warner: $5 Billion Biz?

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Catching the Google Wave

It appears that what a lot of insiders had been predicting has come true.  Last night, the Time Warner board of directors approved the spinoff of its America OnLine (AOL) unit.  While AOL was operating as an independent company within Time Warner, it was not independently traded on the market.

Currently, AOL is owned almost entirely by Time Warner with Google holding a small, 5% share.  That share will be bought out in the spin off process, which is expected to be finalized by the end of the year.

Kara Swisher at BoomTown is reporting that sources inside are saying that Tim Armstrong (AOL CEO) plans to make sweeping changes to the company’s structure.  This includes pigeoning many of AOL’s recent acquisitions like Bebo into a ventures unit  to attract outside investors.  Another big change will be to the various attempts at re-branding the company has seen under past leadership.  Anderson reportedly plans to focus on pumping the AOL brand as well as key AOL services like ICQ and AIM.

Meanwhile, as Anderson continues with his 100-day sweep of AOL, buzz has been happening around what the removal of leadership of both People Networks and Platform-A units in AOL has meant.  It appears that the plan is to consolidate like services into departments and combine services.

Of course, speculation over the valuation of the new AOL is also underway.  Frederick Moran, a respected analyst at Benchmark, figures that the new AOL is worth about $5 billion.  He arrives at this figure by separating the dialup business that AOL still dominates (AOL owns Earthlink) and it’s other top performer, the Platform A ad grouping.  Between them, they have a valuation of close to $5 billion.

Further, AOL has 107 million unique visitors per month across its properties and several advertising networks and other sources that provide revenue steadily.  The separation and independent stock holding will also allow AOL to better leverage itself for acquisitions and transactions.

The official press release from Time Warner is, of course, generally un-revealing.  Some base information on the deal, including how the 5% share Google holds will be moved into Time Warner shareholder’s portfolios in a tax-free move, are given, however.

Overall, this is probably a very good move for AOL, since it’s seen nothing but stifling and heavy decline since being brought under the Time Warner umbrella.  Now it’s a question of whether Tim Anderson’s vision can carry AOL into a new market.  AOL’s brand stigma is fading, so the time may be right (as Anderson is apparently guessing) for the AOL brand to be brought forward once again.


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