AOL's 2000 acquisition of Time Warner for $US164 billion was regarded as the high water mark of the dot-com boom. AOL Time Warner was renamed Time Warner in 2003, following a dramatic loss of value in the tech crunch. The company first mooted plans to sell the AOL division in late 2007.
According to the
Wall Street Journal, Time Warner's primary motivation for the split in its AOL unit is to allow markets to place a more accurate valuation on the company's core advertising and content businesses.
The WSJ and other reports estimate that the advertising and content business may be worth between $US3 billion and $US4 billion, with $US2 billion to $3 billion for the cash-cow access business.
AOL has been involved in merger rumours recently, with
reports that it would either be sold outright to Microsoft or merged with Yahoo!. It seems unlikely that either company would be interested in the dial-up business.
However, possible buyers include EarthLink, which claims its aggressive cost management and efforts to retain long-term subscribers (who require less support) allows it to achieve superior results.
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EarthLink CEO Rolla Huff was recently quoted by the Wall Street Journal as describing the AOL access business as "worth aggressively pursuing," but it isn't obvious that anyone else would be interested. With ADSL, cable and wireless access widely available, dial-up is pretty much a legacy business in most areas.
Still, if anyone can squeeze a buck out of AOL's dial-up business, EarthLink probably could. Absorbing those AOL customers would more than triple EarthLink's user base, so EarthLink could choose to shed a decent proportion of customers that turn out to be unprofitable and still keep the critical mass needed to continue to profitably ride the trailing edge of Internet access for several more years.
