The fate of the partnership may be decided at an all-hands meeting at AOL's ancestral headquarters in mid-July.
The AOL-Time Warner partnership, created at the height of the technology bubble in January 2000, began unraveling almost immediately ... and now Time Warner is ready to cut AOL free.
The entertainment conglomerate served notice to the Securities and Exchange Commission on Wednesday, saying it's preparing to divorce itself of the joint venture.
The 2000 merger, with AOL purchasing Time Warner for a breathtaking $182 billion in stock, was billed as the world's greatest digital media powerhouse, but the combine collapsing in a whimper over a few years.
"The company currently anticipates that it would initiate a process to spin off one or more parts of the businesses of AOL to Time Warner's stockholders, in one or a series of transactions," Time Warner, as the combine is called today, said in an SEC filing. The company said it hasn't made "any decision" yet.
Almost immediately after the deal was consummated by then AOL chief Steve Case and Time Warner's CEO, Gerald Levin, the merger began slipping. Both executives exited the company long ago and in recent months Case said he believed the two firms should be separated. The breakup has been prophesied for months, even years by some, and grew in intensity earlier this month after former Google executive Tim Armstrong was hired as chairman and CEO of AOL.
Earlier this month, Armstrong, who is AOL's third CEO in less than three years, told AOL employees in an inspirational memo that he was embarking on a 100-day tour and review of the company.
"The culmination of the 100-day process will end in Dulles [AOL's ancestral headquarters] with an all-hands meeting in mid-July. At that meeting, we'll review the feedback we've received -- both internal and external. ... Most importantly, we will set a course and focus all of our resources to make that course a success."
So, what went wrong with the merger?
For one thing, AOL, which had sent out millions of floppy disks for consumers just awakening to the Internet, was caught by the shift to broadband even as it dominated the dial-up market. Its highly touted "content" wasn't of much use to most consumers. And finally there was little synergy between AOL and Time Warner.
During an interview this month, Time Warner chairman and CEO Jeff Bewkes indicated Armstrong would be on a dual track -- improving the AOL business and seeing whether AOL would be more successful as an independent unit. Wednesday's SEC filing indicates the company favors spinning off "one of more parts" of AOL.
Separately, Time Warner said it planned to purchase Google's 5% ownership in AOL, which Google had purchased for $1 billion in 2006. In its first-quarter earnings report Wednesday, Time Warner reported net income of $661 million -- a decrease from $771 million in the previous year's figures. Revenue of $6.95 billion represented a 7% decline, the company added.
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