Time Warner Inc. chief executive Richard D. Parsons yesterday ruled out selling America Online Inc., saying the Dulles-based Internet service is the most undervalued part of his far-flung media company and that his top priority is accelerating the Internet service's transition to an ad-driven enterprise.

Speaking at a Goldman Sachs Group Inc. investor conference, Parsons said he is exploring a variety of ways to ramp up AOL's shift, all of which involve Time Warner continuing to own a major stake. "We want to hang onto that potential and do what we can at this time, in this market, to jump-start and further accelerate AOL's presence," he said.

Parsons declined to comment specifically on the continuing negotiations between Microsoft and Time Warner over the possibility of combining their MSN and AOL Internet units into a partnership or advertising joint venture.

Microsoft is pressing for AOL to drop Google Inc. -- a growing competitive threat to the Redmond-based software computer giant -- as its primary search engine and replace it with MSN Search as part of any deal.

"People are jockeying for what are going to be the advantaged positions going forward," Parsons said. "We are a key piece on that whole game board."

With its subscriber-based, dial-up business in decline, AOL is seeking to expand its reach by offering free content on the Web, with its beefed-up AOL.com site at the center of the effort to profit more from ads. AOL also owns a number of other popular Web properties, including Moviefone, Mapquest and the AOL instant messaging service, AIM, but the challenge is to convert more of the consumer traffic on those sites into revenue, according to Marianne Wolk, an analyst with Susquehanna Financial Group.

While AOL has a healthy presence in the United States, its global presence is too small, Parsons said. He foresees global expansion coming through AOL.com's audience-based online strategy.

AOL could have a bigger influence on Time Warner's stock price than an upcoming partial spinoff of its cable television unit, he said, provided investors begin to think of America Online as two entities. In one way, AOL is a subscriber-based service that, despite getting smaller, still generates more than $1 billion annually in cash. In another way, AOL is an audience-based service that offers potential for expansion through ad sales.

"If we can get it to work the way I think we can get it to work, it will not only increase in value . . . it will help all of our other businesses increase," Parsons said.

Time Warner chief executive Richard D. Parsons, shown here in 2004, calls AOL undervalued, particularly as it becomes an ad-driven enterprise.