Analyst: Sell, Spin-off or IPO AOL: To Get Best Value

The headline for Fulcrum Global Partners analyst Richard Greenfield’s Time Warner/AOL earnings note: “Does Time Warner Need to Take More Drastic Action to Highlight the Value of AOL?” , noting that the company has made “significant progress … transforming from a business in freefall with no clear-cut strategy to a relatively stable asset, to a business that is growing.” Greenfeld, who doesn’t hold punches when he’s unhappy with a company, is “excited by the opportunity for AOL to transform itself into a higher-margin advertising-driven business, with cost cutting mitigating the negative impact from subscription-revenue declines.”
If the investors won’t give it the right value as part of TWX, he suggests selling, spinning off or offering an IPO for part of AOL — particularly if investors don’t budge after AOL.com opens to non-members this summer.

Looking at the earnings again and analysts’ notes, AOL’s 45-percent ad increase actually boils down to 17-20 percent when the Advertising.com revenues are subtracted; that’s still healthy but behind Yahoo, Google and major newspaper sites.
From the earnings call transcript:


– Chairman & CEO Dick Parsons: “Overall, we’re pleased that AOL is delivering consistently strong profit growth and we see real progress in their continuing transition to a business model that better balances subscription and advertising revenues. AOL should grow to become a much more significant advertising platform. And we view AOL as a real opportunity for the overall company and we’re committed to
realizing its value.”
– Parsons said it was too early for results from the migration of AOL broadband customers to Road Runner, complicated by the difference between the two systems. He said it would be summer before there are any “meaningful results.” Ditto for the ad side. Earnings: AOL Ad Revs Up 45 Percent, Two Million Subs Left In Last Year
– Jeff Bewkes, chairman, entertainmentand networks group on upcoming Turnet broadband net Game Tap: “I wouldn’t link Game Tap directly with, say, what Warner’s or New Line or HBO or Turner Networks are doing in game licensing but what we’re doing across the Company is co-licensing, co-producing, in certain cases; Matrix is one of them where we’ve just announced a multiplayer game. We’re at various
stages of either full or half participation in the development and then publishing of games. Finally, AOL and our cable company are game distributors, they provide games you can play at home. At this point mostly not multiplayer games, but eventually that, and so we’ll be in the games business in essentially all of those dimensions.”

Related: . Earnings: AOL Ad Revs Up 45 Percent, Two Million Subs Left In Last Year

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