Kicking them to the curb where they belong

Rico says no one loves AOL, and an article by Richard Pérez-Peña in The New York Times tells why even Time-Warner doesn't any more:

Time Warner’s announcement on Thursday that it will spin off AOL was the much-anticipated divorce filing for a multibillion-dollar corporate marriage that came to symbolize an entire era in American business, but that had long been acknowledged as a failure. The company argued that, despite the hype and hosannas that greeted the merger announcement in January 2000, the intervening decade has proved that each piece will be better off going its own way.
The split, which Time Warner executives have said for months was coming, gave a last echo of the dot-com bubble, which burst in the months after the merger was announced. That deal, one of the biggest in history, came at the height of a national infatuation with Internet and media stocks, a time whose reasoning is hard to recall after living through the ensuing bust and boom and in the depths of a severe recession. The merger was fed by heady ideas that did not quite pan out— that big online audiences would necessarily yield big profits, and that there were profound synergies to be had by owning different media.
Jeffrey Bewkes, Time Warner’s chief executive, has set about paring down one of the world’s largest media conglomerates, in particular shedding delivery mechanisms. The company spun off its cable television subsidiary in March. And AOL, though much-reduced in size, remains a supplier of Internet service to millions of people. “We’re focusing the company now on its core content businesses— TV and film production, television networks, and publishing,” Mr. Bewkes said Thursday at the company’s annual meeting. But in other recent comments, he has not ruled out also selling the company’s magazine arm, Time Inc., one of the world’s largest publishers. He added that “for AOL, becoming a standalone company will give it more focus and more strategic flexibility.” It could also make it easier for AOL to attract talent and raise capital. He said the details of the spinoff had not been determined but that he expected it to be completed around the end of the year. With AOL’s revenue and profit shrinking steadily for years, analysts have called it a drag on Time Warner’s stock price. The stock closed Thursday at $23.55, up 55 cents.
“There’s still a substantial business at AOL, but Time Warner investors are giving it little to no— potentially negative— value, so separating out should be a positive,” said Richard Greenfield, a managing director of Pali Capital Research. “It won’t be worth nothing, and people have viewed it as worth nothing, or even a liability.” More important, he said, was the message that Mr. Bewkes is pursuing a clear, well-understood strategy. “They said they were going to get rid of cable. They said they were going to get rid of AOL. And they’re doing it,” he said.
AOL was built on dial-up Internet service, a once-booming and now almost-forgotten business. And like many dot-coms in the 1990s, its stock price ballooned far out of proportion to its financial performance. Before the merger, AOL’s market capitalization was more than twice Time Warner’s, but it had less than one-quarter the revenue of its new partner.
When the merger was announced in 2000, the two companies had a combined market value of more than $300 billion. By the time the deal was consummated in 2001, with Internet stocks plunging and recession taking hold, that had fallen more than $100 billion. Today, the combined market capitalization of Time Warner and the new Time Warner Cable is less than $40 billion.
Steve Case, the AOL chief and co-founder, who was chairman of the merged company until 2003, has been publicly advocating splitting them again since 2005. On Twitter on Thursday, he insisted that the combination could have worked as planned but was poorly run. In one tweet, he wrote, “Thomas Edison: Vision without execution is hallucination. Pretty much sums up AOL/TW failure of leadership (myself included).”
Time Warner’s strategy for AOL has mirrored the entire company’s— a move away from delivery and toward content. It has hired prominent journalists to build a series of online magazines, trying to capitalize on the stream of visitors to its site.
For three years, AOL has been steadily getting out of the business of paid Internet service, becoming more reliant on advertising sales, but that strategy has been hampered by the worst advertising slump in generations. In March, Time Warner named a new chairman and chief executive of AOL, Tim Armstrong, who had headed advertising sales at Google.
AOL has about 6 million paying subscribers in the United States, down from 13 million at the end of 2006. Last year, for the first time, subscription revenue was smaller than ad revenue. Over all, AOL had $4.2 billion in revenue last year, down from $9.1 billion in 2002.
Time Warner as a whole, including the cable unit that is now a separate company, had $47 billion in revenue last year.

Rico says it's an unlamented divorce from a mistake of a marriage...