Report: Case thinking AOL spinoff not a bad idea

Spinning off the America Online Internet division from AOL Time Warner (AOLTW) might not be such a bad idea, Steve Case has said to senior company officials, according to a report published Tuesday in The New York Times.

Case, while head of AOL, brokered the company's monolithic acquisition of Time Warner, which was finalized in January of 2001 and cost AOL about US$147 billion. Case, who left the role of company chairman this month, is said to hold little sway at AOLTW these days following a stretch of difficulty after the merger failed to live up to its billing and the company's stock tanked.

Although Case has publicly continued to support the merger, the Times said that two senior officials, with whom he has recently chatted about the topic of a spinoff say that he is speaking "favorably" of that notion now. The two officials spoke to the newspaper on the condition that their names not be used in print. The Times also reported that "long-time colleagues" of Case have said that he tends to talk out loud to discuss possibilities for the company "sometimes more provocatively than seriously," the newspaper said.

AOLTW had this to say about the story: "As we've been saying for months, the company is focused on turning around AOL and returning it to a growth track, not spinning it off," spokeswoman Mia Carbonell said, reading a statement.

Case, through a company spokesman, declined to comment to the Times for its report.

Comments supposedly made privately by Case have tended to find their way into news reports about AOLTW, which has struggled since the merger to find its footing even though it is the world's largest media company. Investigations into AOL accounting and business practices have been an issue and AOL and Time Warner never have quite come together as had been expected and hoped.

"There's nothing in the story," Jupiter Research analyst David Card, who is based in New York, said Tuesday morning, adding that the news account merely says that Case has been talking about spinning off AOL and Case is known to make those kinds of comments which then wind up in print. "I don't think it's going to happen," Card said of the spinoff.

Apart from the little news nugget that Case has privately spoken favorably about a spinoff, the story is mostly a recap of what the Times and other news media have reported in the past about AOLTW and Case comments and Case's past and current role in the company.

AOLTW never has achieved its potential in cross-media marketing, which needs to be more centralized, and never has fully integrated its two halves, Card said in commenting on the Times report. AOL's "very loyal customer base" is ripe for having the Time Warner properties marketed to that base. Overall, AOL and Time Warner are better off merged than separate.

AOLTW's vast stable of holdings includes Sports Illustrated, Time, People, Fortune and dozens more magazines, the Home Box Office cable channel, broadcasting ventures such as CNN and the Cartoon Network and business divisions that make movies and musical recordings.

"The only thing it would do would be to let AOL focus," on its core Internet business, Card said of the spinoff. "If it was freed from Time Warner what would it do" that isn't now being done? Probably, not much in Card's assessment, which means that spinning off AOL probably makes little sense for that division.

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