AOL being prepped for sale: Will EarthLink bite?


The Atlanta Journal-Constitution
Published on: 08/06/08

Time Warner executives signaled Wednesday they are prepping dial-up Internet provider AOL for a sale, further fueling speculation Atlanta-based EarthLink might swoop in to buy it.

The media giant, which released its second-quarter earnings Wednesday morning, said it will split AOL's Internet access business from its advertising business. The businesses are to start running separately in early 2009, and observers say the move makes it easier to sell off or merge either unit with another company.

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Time Warner CEO Jeff Bewkes confirmed speculation about the split that had been building for days, but he did not discuss whether the units would be put on the block. "We've made the key decisions that will enable us to run AOL's access and audience business separately beginning in 2009," he said in a statement.

Analysts have named EarthLink as a leading candidate to buy AOL. Though EarthLink CEO Rolla Huff has not been that direct, he has said EarthLink plans to grow and has mentioned AOL, United Online and MSN as prime candidates for deals.

EarthLink delved into — and eventually abandoned — other ventures outside its traditional dial-up business, including free municipal wireless Internet and a mobile-phone service aimed at teenagers. Huff has said the company is narrowing its focus to keeping its long-term customers and — if the deal makes sense for shareholders — buying subscribers from other dial-up Internet providers such as AOL.

Huff has argued that EarthLink is the best dial-up company to lead industry consolidation but isn't sure how quickly that would happen.

AOL's revenue for the quarter dropped 16 percent to $196 million — including a 29 percent decline in revenue from customers who have stopped using AOL. The company has 8.1 million users — after losing 604,000 customers during the quarter and 2.8 million from a year ago.

The company said this is partly because of AOL's recent strategy to focus more on its advertising business.

Time Warner is the parent of Atlanta-based Turner Broadcasting System.

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