Report: Time Warner Weighs AOL Sale

Three years after a ballyhooed cross-media marriage, Time Warner is considering divorcing America Online, according to The New York Post.

The publishing giant has asked its bankers at Goldman Sachs to examine options for the Internet business, including a sale, spin-off or restructuring, the paper said, citing anonymous sources.

Mia Carbonell, Time Warner’s director of corporate communications, dismissed the Post’s report as “a rumor” and declined further comment.

The report isn’t the first time news of a possible spin-off has hit the buzzmeter. Last May, investors were digesting a New York Times report that said former chairman and AOL founder Stephen Case had talked privately about spinning off the AOL unit.

During the past couple years, company officials have said they may consider a sale or spinoff of the unit if it doesn’t grow as forecast.

AOL is not a financial liability. Indeed, its cash flow helps Time Warner service its debt load. But it is steadily losing subscribers to lower-priced rivals as well as high-speed providers. To stem defections, the ISP has introduced new features to appeal to dial-up subscribers, including more content, services and new tools, as well as a bare-bones version.

It also recently teamed with DSL specialist Covad Communications in a bid to move existing customers onto its own co-branded broadband offering.

But as more users switch to broadband, AOL’s overall dial-up base is expected to continue eroding over the next five years, by Merrill Lynch’s estimate at around two million subscribers each year.

AOL said it lost 399,000 subscribers in the fourth quarter, ending 2003 with 24.3 million members. In the company’s most recent earnings call, CEO Dick Parsons cautioned industry-watchers not to “overreact to what you see on a quarter-to-quarter basis.”

Goldman Sachs’ report on possible suitors will be presented at Time Warner’s April board meeting, the paper said. Also at that time, AOL’s CEO Jonathan Miller will provide a business update. Time Warner executives are expected to take the information and decide what, if anything, to do.

If Time Warner is looking to sell AOL, three potential buyers could be interested, The Post report said: InterActiveCorp; Yahoo!; or former AOL Time Warner Chairman Steve Case.

In the meantime, Time Warner, which dropped AOL from its corporate letterhead because of negative associations with the dot-com bust, has been pumping significant resources into its cable operation.

This year, the Time Warner Cable will place big bets on Voice over Internet protocol service , after receiving encouraging results from its first market trial in Portland, Maine.

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