A Fool Looks Back

Time to take a stand
After all of these years, Time Warner (NYSE: TWX) appears ready to make a move on unlocking the value of its AOL subsidiary. The company suggested during this past week's quarterly conference call that it will explore ways to separate the company's declining Web-access business from its thriving online-advertising future.

AOL has taken a round trip in terms of investor sentiment. It was supposed to be the growth play when it combined with Time Warner, even though it accounted for just a quarter of the overall revenue at the time.

Initially, America Online was closing in on nearly 30 million monthly subscribers. Then someone moved AOL's cheese. When cable and telephone companies began to promote their own broadband connectivity, AOL began to feel less relevant. For the first time in more than a decade, AOL is now watching over fewer than 10 million paying subscribers.

That figure stands as a sharp contrast to the high-margin online advertising revenue that AOL is bringing in. It remains such a potent hotbed of Web activity that even though AOL has now slipped to less than 10% of the revenue mix at Time Warner, AOL's operating profits are still in the double digits as a percentage of Time Warner overall.

There are many ways to unlock the value of AOL. Time Warner can sell it, perhaps to minority investor Google (Nasdaq: GOOG). The company could spin it off, either intact as AOL or by breaking it up into two parts and keeping one. You can't unlock value if you won't turn the key, and the important thing here is that Time Warner is now willing to do just that.

Briefly in the news
And now let's take a quick look at some of the other stories that shaped our week.

• Yahoo! (Nasdaq: YHOO) is throwing in the towel. No, I'm not talking about the Microsoft (Nasdaq: MSFT) buyout. Yahoo! is calling it quits in powering its own music-subscription service. Despite offering a dirt-cheap price, it just wasn't a persuasive product for music-loving consumers. Yahoo! will refer its subs to Rhapsody America, powered by RealNetworks (Nasdaq: RNWK). Can I cue up Simon & Garfunkel's "The Sounds of Silence" to go with that news item?
• There will be no British invasion for Amazon.com (Nasdaq: AMZN). The company is pulling out of Europe when it comes to DVD rentals and is handing over its estimated 300,000 subscribers to the larger Lovefilm. Fate can be funny. A few years ago, Netflix (Nasdaq: NFLX) shocked investors with a price cut, out of fears that Amazon was going to launch a stateside service. That never happened. Now Amazon is hanging it up overseas, even though it will invest in Lovefilm. Now that is a surprise ending.

Until next week, I remain,

Rick Munarriz