Time Warner announced today that it will spin off AOL as a standalone company. This completes a full circle to a 8 year old saga that was filled with controversies from the beginning to the end.
Talk about a marriage that was never meant to be. Dubbed as a merger of equals, the $147 billion merger was meant to create a mega media company, AOL Time Warner, with rich content brands from Time Warner to complement the large user base AOL had at that time. While traditional media experts and people in technology called Steve Case’s bluff, it did not stop Gerald Levin, then then chairman and ceo of Time Warner from going through the deal.
The stock market also blessed this deal. Time Warner shares jumped up $30 to $95 on the announcement, while America Online jumped $13 to $85.875. A net $10B was added to the market capitalization of the companies.
AOL at that time had already seen the oncoming train, that is the broad usage of internet that will be driven by ad revenues. Yahoo, Hotmail, MSN and the upstart Gmail had already started giving free email service to the already broadband internet addicted consumers. At the same time AOL did not have a great strategy to transition to broadband. So with dwindling subscriber growth and revenue, this was a perfect out for AOL and Steve Case.
The unrest (or was it better sense prevailing) against AOL diluting (not to mention draining cash) Time Warner prompted the company to drop the cancer AOL from its name. (There goes a 1M for printing new business cards). Steve Case had by then cashed and walked away from this company. So had Gerald Levin to be replaced by Dick Parsons.
A couple of years and a few other questionable deals like Bebo for $850 Million (and constant rumors of selling Bebo off) and series of write downs later it finally took Jeff Bewkes, the new CEO, to pull the plug and end the misery.
The whole spin-off was on the cards after the recent hires of Tim Armstrong and a few of his followers from Google. Time Warner announced that it is also buying back the 5% stake from Google.
Here is the new executive team for AOL LLC. Look for a large churn here as AOL tries to find its identity.
This might turn out to be great for AOL if they can figure out a way to maximize the potential of some great media brands and properties they have. Hopefully when and if they do decide to go public again, it might also be its way to payback the stockholders of Time Warner whose value they have eroded all these years.
Office Press Release from Time Warner
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