Impending AOL Split Now Official

8th August 2008

Since the beginning of the year we have heard off and on that AOL’s access and media units are likely to be split. This has now been confirmed by none other than CEO, Jeff Bewkes, while releasing the financial results of the company for the second quarter of the year. The process is expected to start early next year.

Speculation, however, continues to persist about Time Warner washing their hands off AOL, by selling it to some big player in the online advertising market.

The second quarter results show that it was not a very lucrative season for AOL. Revenue has fallen to $1.1 billion, which is a drop of 16 percent. Only their advertising revenues have gone up by 2 percent (i.e. $8 million), but that gain is certainly not sufficient to make up for the losses suffered by the Internet access division.

The once popular internet service provider has lost 2.8 million customers since last year, bringing down their subscriber base to just 8.1 million users. They have lost 604,000 subscribers in the second quarter itself. In monetary terms, that is a loss of $200 million. Ironically, the company had increased its charges for the dial-up services in late June.

The operating income of AOL has dropped by a steep 36 percent and is now pegged at $230 million. Unconfirmed reports state that AOL’s access business may find a buyer in EarthLink.

In the meantime, CEO of Time Warner Cable, Glenn Britt, says that revenues are up 7 percent, seeing a decline only in television pay-per-view. An additional 214,000 people have subscribed to the ‘triple play’ offering of cable TV, broadband Internet and telephone service.

Tags: aol, mergers-and-acquisitions, time-warner

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