David Kirkpatrick

May 29, 2009

AOL and Time Warner part ways

Filed under: Business, Media, Technology — Tags: , , , , , — David Kirkpatrick @ 4:06 pm

Time Warner finally pares a lot of dead weight from it’s already bloated structure and in the process concludes one of the ghastliest (on so many levels) deals of the tech boom of the late-90s/early 00s. AOL was an immediate drag on Time Warner and never lived up to any aspect of its end of the deal.

From the link:

Time Warner will finally rid itself of AOL, its struggling Internet subsidiary, by spinning it off as a publicly traded company.The move comes as no surprise. Time Warner executives have been considering for years whether and how to dump AOL, whose transformation into an ad-supported business has been a disappointment.

The separation will allow Time Warner to continue “reshaping” itself with a focus on its content business, while AOL will gain more flexibility to seek Internet market success, Time Warner said on Thursday.

To proceed with the separation, Time Warner will first buy the 5 percent of AOL that Google owns, having paid US$1 billion for it in December 2005. That transaction will happen in this year’s third quarter. Earlier this year, Google wrote down that investment, acknowledging it has dropped in value.

Here’s something I wrote about the deal back in December 2003:

Wired magazine ran a great piece in the November 2003 issue on the death march of AOL outlining the company’s ongoing problems. AOL’s subscriber figure most likely peaked in the third quarter of 2002 at around 35 million. It has consistently fallen since that time. In January 2001 the merger of AOL and Time Warner was approved, the stock began trading as “AOL” and the AOL side of the merger ran the show, so to speak, because its stock valuation (based on nothing more than hot air bandied around a boardroom) was higher than Time Warner’s business filled with publications and other physical media.

The tech bust hit AOL pretty hard and in September of this year AOL/Time Warner dropped “AOL” from the name to separate the brands and switched back to the “TWX” ticker symbol. Yesterday TWX closed at $16.48 with a 52-week high of $16.98 and a low of only $9.90.

Like many companies during the boom, AOL got ahead of itself and made the common business mistake of hubris. It viewed its hold over Internet service as a given. Not unlike Microsoft underestimating the Internet, AOL completely misjudged the broadband threat and is now late in the game and scrambling. All those Net newbies who wanted the handholding provided by AOL were forced to wean themselves in order to make the early switch to DSL or cable Internet access and found the transition pretty painless.

Of course unlike Microsoft, AOL doesn’t have a stranglehold product (Windows) that allows it to quickly get up to speed in the broadband game. Microsoft may have been late on the World Wide Web boat, but it got there via a jet-engined craft with a fiberglass hull. AOL has been caught staring at the broadband access train pulling out of the station wondering if its cool, tech boom scooter will be enough to keep it up to speed.

Which leads back to AOL’s ill-fated Netscape acquisition. Netscape lost the browser war to Microsoft long ago (its browser tech has effectively been abandoned by AOL) and the parent company is looking for any way to parlay the brand name into a commodity. Hence the Radio@Netscape Plus player. Replacing a perfectly adequate app in Spinner, and actually making it a little worse with the 31 song re-up rather than Spinner’s old 201song string.

Leave a Comment »

No comments yet.

RSS feed for comments on this post. TrackBack URI

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: