AOL and Time Warner part ways

AOL will begin trading today on the New York Stock Exchange as an independent company for the first time in eight years.  Today, the two companies will go their separate ways eight years after their $160 billion merger in 2001. Each will be a smaller version of what they were a decade ago. AOL, once the largest dial-up internet service provider in the US, will be preparing to do battle with Google, Yahoo! and Microsoft in the $29 billion US online advertising market. Its strategy is to become the top creator of news, information, entertainment and other digital content. However, the competition will be tough. In July, Microsoft and Yahoo! announced an alliance for search advertising; and Google recently launched new technology that makes it easier to sell advertising over the internet. AOL hopes to build up traffic by creating a portfolio of more than 70 niche sites covering areas such as property sales, technology, personal finance and lifestyle. It now relies on its dial-up access customers for less than 20 per cent of its traffic. It also hopes to move into what it calls ÔÇ£hyperlocalÔÇØ services, and is currently digitizing entire towns, connecting schools, banks, community groups and businesses and putting in local editors. It is currently testing the service in 17 markets and plans to be in 30 by the end of the year and hundreds by the end of 2010, through its patch.com local platform. New York-based AOL was valued at more than $150 billion at the time of its merger with Time Warner. It is now worth $2.5 billion. April saw the arrival of new chief executive Tim Armstrong, a former Google advertising executive, who has been preparing the company for todayÔÇÖs split. Seeking to cut $300 million in annual costs out of the business, he has re-organized the executive team, announced plans to lay off one third of AOL staff and assembled a new board. This morning, Armstrong will ring the opening bell on the New York Stock Exchange. AOLÔÇÖs revenue was $4.2 billion last year, down from $9.1 billion in 2002, with advertising outpacing subscriptions as a source of revenue for the first time. At its peak in 2002, AOL had 27 million subscribers. The merger between AOL and Time Warner, which remains the biggest deal in history, was fuelled by a surge of investments just before the burst of the dot com bubble. It was hoped that AOLÔÇÖs subscriber base and Time WarnerÔÇÖs content would complement one another but this was not to be the case. In particular, AOLÔÇÖs dial-up service began to face increasingly stiff competition from cable and phone companies, who offered fast broadband access. Time Warner now plans to return to being a pure content company through Warner Brothers, the biggest movie studio in the US, and Time Inc, the biggest magazine publisher, as well as its television assets such as HBO and CNN. However, Time Inc, which publishes Time, People and Sports Illustrated magazines, is facing tough challenges, as its earnings fell by 42 percent and advertising sales by 22 percent in the third quarter of this year.  *┬á┬á┬á┬á┬á┬á┬á *┬á┬á┬á┬á┬á┬á┬á *