On Wednesday, Time Warner said it will split off AOL’s remaining dial-up business.
Led by newly minted CEO Jeff Bewkes, the move comes in the face of AOL subscriber losses and reduced revenue. Bewkes shared the news during his first financial briefing with analysts since taking over at the beginning of the year. “This should significantly increase AOL’s strategic options,” he said.
Bewkes is also considering reducing Time Warner’s 84 percent stake in Time Warner Cable, but the buzz centers on the AOL split and the company’s earnings. AOL’s revenues declined $2.6 billion, or 33 percent, to $5.2 billion in 2007. A decrease in subscription revenues drove those losses.
Subscriber Woes
Subscription revenues were affected by the sales of AOL’s Internet access businesses in the U.K., France and Germany, the company said, as well as a decrease in domestic AOL subscribers. The U.S. drop partially reflects AOL’s previously announced strategy to offer its e-mail, some software and other products free.
As of December 31, the AOL service had 9.3 million U.S. access subscribers, a decline of 740,000 from the prior quarter and 3.8 million from the year-ago quarter, reflecting subscriber losses as AOL focused on advertising revenues.
Former Time Warner CEO Dick Parsons made it clear last September that the company would divest itself of the AOL access business at some point. The move aims to quicken AOL’s migration from a dying dial-up business to a thriving Internet advertising business. The company did not offer details on when the split will take place or what the company will look like when it does.
The Somewhat Silver Lining
The news isn’t all grim for AOL. The Internet portal saw an 18 percent increase, or $345 million, in advertising revenues in the fourth quarter. Advertising revenues benefited from growing sales on third-party Internet sites as well as…