Time Warner to split up AOL division

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Time Warner will split AOL‘s dwindling paid Internet-access business from the rest of its AOL operations.

Time Warner CEO Jeffrey Bewkes announced the move in a conference call Wednesday shortly after a quarterly earnings report showed AOL’s fourth-quarter revenue slid 32 percent as it continued to lose paid subscribers.

The move would separate AOL’s paid subscription Internet access service, which lost another 740,000 customers last quarter, from its advertising-driven Web sites and content. Baltimore-based Advertising.com, acquired in 2004 for $435 million, has emerged as a cornerstone of AOL’s advertising-driven business model.

While operating income at the AOL division fell 70 percent from year-ago results and overall revenue slid, revenue from advertising sales at AOL gained 10 percent.

AOL now provides most of its services, including access to AOL e-mail accounts, for free to those with Internet connections. Its dial-up service lost 3.8 million paid subscribers last year, and now counts just 9.3 million customers, down from well over 20 million at AOL’s peak several years ago.

It was not clear what any split at the AOL division would mean for its operations in Northern Virginia, where AOL has 4,000 employees. Nor was it clear exactly what Time Warner plans to do with the paid Web access division.

News that Microsoft is bidding nearly $45 billion to acquire Yahoo makes it unlikely that either Microsoft or Yahoo would be interested AOL buyers. Time Warner said the separation of the AOL divisions will “take several months.”

Time Warner (NYSE: TWX) cut 2,000 AOL jobs in October, including 750 in Northern Virginia. It also announced last year that it would relocate the AOL corporate headquarters from Dulles to New York.

AOL also said Tuesday it acquired British e-commerce marketing firm buy.at to become a unit of Advertising.com. The purchase adds a new online advertising product and also helps expand the company’s international presence, executives said.

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