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Time Warner Considers Spinoffs

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By Frank Ahrens
Washington Post Staff Writer
Wednesday, February 6, 2008

Time Warner's new chief executive, Jeffrey L. Bewkes, is preparing to use his first address to investors today to outline plans for shaking up the world's largest media company, starting with an attempt to sell or spin off Time Warner Cable to help reverse the corporation's skidding stock price.

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Bewkes also is likely to signal plans to break up AOL in the coming year, as Time Warner holds on to AOL's growing online advertising properties and sells its struggling Internet service provider business, according to a source close to the company who spoke on the condition of anonymity because Bewkes's speech has not been made public.

Bewkes, 55, plans to address investors and analysts this morning as the media giant reports its fourth-quarter and full-year 2007 earnings. Analysts expect the company to slightly beat its 2006 performance.

A Time Warner spokesman declined to comment yesterday.

Fast-growing Time Warner Cable is the industry's second-largest cable system, after Comcast. Time Warner Cable has traded as a public company since last year, but Time Warner continues to hold 84 percent of it. A spinoff would liquidate Time Warner's remaining interest and create a company worth as much as $34 billion, analysts estimate. Time Warner is currently worth about $56 billion.

The Dulles campus of AOL has been hit by two rounds of layoffs in a little more than a year. The unit's original business -- dial-up Internet access -- is becoming obsolete as more customers switch to high-speed broadband service.

Under former AOL chief Jonathan F. Miller and his successor, Randy Falco, AOL is changing into an ad-supported content portal and online advertising business with its Platform A division, which delivers ads to sites such as Facebook. Even as it sheds dial-up employees, AOL continues to strengthen its advertising portfolio; yesterday, it acquired Buy.at, an online marketing company.

In an interview with The Washington Post in October, Falco acknowledged the possibility of an AOL split-up; today, Bewkes is expected to fill in details and set down a timeline.

Potentially complicating an AOL breakup is Microsoft's proposed $44.6 billion takeover of Yahoo, announced Friday, that would create an online advertising behemoth that, though still smaller than Google, would dwarf AOL.

Wall Street has demanded a major shakeup at Time Warner and has been punishing the stock price to get one.

The company's stock traded at $94 a share at the end of 1999, just before Time Warner announced its merger with AOL, creating what was hailed as the first truly 21st-century media and Internet goliath.

The company's stock spiraled downward as the merger floundered and bottomed out at less than $10 a share in July 2002. The stock has made a mild recovery since then but cannot seem to consistently climb above $20 a share.


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