As AOL Turns: The Spin-off/No Spin-off Edition

Whenever AOL looks like it’s gaining some traction in its impending web launch campaign, those pesky stories about its future crop up again. This set has a twist, though — BusinessWeek’s Catherine Yange says company insiders tell her a spin-off would be considered to give AOL the cash it may need should potential acquisitions of “hot Internet properties” grow too expensive. No official targets from AOL but BW suggests iVillage, CNET, Neopets, Miva and MySpace as potential good fits. (Funny — it’s the second major net company I’ve heard linked to Neopets today.)
This story has AOL vying for — and losing — About.com because Time Warner bean counters weren’t being cooperative about potential acquisitions. Those 22 million About.com uniques could have catapulted AOL past Yahoo in monthly visitors and given it some sorely needed search engine help. AOL CEO Jon Miller and other senior execs took their case directly to TW CEO Dick Parsons in May. He asked if a spin-off was needed to help raise equity; the AOL execs agreed to revisit the idea a year from now and Parsons agreed to help loosen purse strings in the interim.
Miller told the FT a possible spin-off wouldn’t even be discussed until next year, that the unit would “need to have traction and a track record to have that [spin-off] conversation.” He also raised the issue of acquisitions, saying that’s the main reason to even consider such a move. “The internet is a dynamic sector and a combination of internal development and acquisitions is appropriate. To participate in a market with frothy multiples, you might need a currency that is similarly frothy.

Meanwhile, as The Street and others note, the New York Post reported AOL could wind up with Time Warner Cable in the same spin-off. This one just doesn’t come close to computing for me. It would muddy the waters much more than TW or either subsidiary needs.

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