Time Warner, AOL separation could re-inspire online pioneer

Merger of the two companies never had the synergy it needed

After a fairly long and troubled relationship, Time Warner Inc. and AOL LLC are calling it quits.

Time Warner Chairman and CEO Jeff Bewkes made the announcement today, saying its board of directors authorized management to proceed with plans for a "complete legal and structural separation" with the company. After the legal work is done, AOL will be an independent and publicly traded company.

One analyst said this might be just the opportunity that AOL needs to right itself and become something of the cool, ground-breaking company that it was in its heyday.

"This does give AOL another chance to become more relevant," said Dan Olds, principal analyst with Gabriel Consulting Group Inc. "It's interesting to note that in a lot of ways, AOL was one of the very first social networking movers and shakers. However, they lost that momentum years ago and now companies like Facebook, MySpace, Twitter and Google have taken the ball and run with it far in advance of AOL."

The separation will need to pass review by the U.S. Securities and Exchange Commission. Time Warner noted in a release that company executives hope to complete the separation by the end of this year.

Olds said the Time Warner and AOL merger was problematic from the outset.

"The Time Warner and AOL marriage was consummated during those heady times when synergy between old-line media companies and anything Internet-related was king," he said. "AOL was the fuel that was going to propel Time Warner to the stratosphere. Unfortunately, the synergies between the two really didn't materialize in any sort of meaningful way for either company. Time Warner got into this without having a solid understanding of what AOL really did and the foresight to see that perhaps AOL wasn't going to be the primary line to the Internet for a huge number of users over the long term."

AOL bought Time Warner in January of 2000. CNN.com reported that at the time the merger was the largest in history.

"The separation will be another critical step in the reshaping of Time Warner that we started at the beginning of last year, enabling us to focus to an even greater degree on our core content businesses," said Bewkes, in a statement. "The separation will also provide both companies with greater operational and strategic flexibility. We believe AOL will then have a better opportunity to achieve its full potential as a leading independent Internet company."

Olds noted that AOL's most compelling product these days is its instant messenger, AIM. And with competition in that market, the company has done well to stay ahead of its rivals.

He added that the company might be smart to form some strategic partnerships to shore up its services and rebuild its user base. Looking to joint ventures with the likes of Facebook or Twitter could reignite some of its old hip factor, as well.

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Sharon Gaudin

Sharon Gaudin

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