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News >  Business

Time Warner to spin off AOL

Associated Press

NEW YORK — When AOL flashed $147 billion in stock puffed up by the dot-com boom, Time Warner, one of the world’s biggest media companies, fell into its arms in 2001. They swooned over their combination of Internet access and traditional media.

But before long, reality intruded. Among other problems, AOL’s dial-up Internet access business was fading, diminishing whatever benefits there might be in having AOL spread Time Warner content online.

Finally, Time Warner filed for the corporate world’s version of a divorce Thursday. It said it will spin out AOL as a separate company and get on with its life as a movie, TV and publishing conglomerate.

Now AOL will try to bounce back with the help of its online advertising business, a challenge that falls to former Google Inc. advertising executive Tim Armstrong, 38, who was hired as AOL CEO in March.

Time Warner owns 95 percent of AOL and will buy out Google’s 5 percent stake during the third quarter for an undisclosed amount. From there, AOL and its 7,000 employees will be spun off into a separate publicly traded company around the end of the year.

“For AOL, becoming a standalone company will give it more focus and strategic flexibility,” Time Warner’s chief executive, Jeff Bewkes, said at Time Warner’s annual shareholder meeting Thursday in New York.

Meanwhile, Time Warner will focus on movies, cable TV networks such as HBO and CNN, and publishing magazines such as Time, People and Sports Illustrated.

Originally known as America Online, AOL once defined the Web for millions of people. But much of its original revenue came from providing dial-up access, a business that peaked for AOL in 2002 at 26.7 million subscribers, back when the company stuffed free trial CDs in magazines and mailboxes. The march of broadband ate away at the business, and AOL had just 6.3 million dial-up subscribers at the end of the last quarter.

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