Time Warner Inc. said it would split AOL's dial-up services and advertising businesses into separate units by early next year, which could facilitate a sale or merger of either business, Reuters reported Wednesday.

The media group also released its quarterly results with a lower profit dragged down by AOL. However, it still slightly outperformed Wall Street expectations, due to strong advertising sales from its cable TV networks and films.

The possible split shows Time Warner's focus shift to creating content from distributing. "As we continue to reshape Time Warner, we'll increasingly focus on our goal to create and manage high-quality branded content," said Chief Executive Jeffrey Bewkes, according to Reuters.

The company has announced it will shed its cable services division, Time Warner Cable, by the end of the year, according to the Reuters article, posted on the BNET Web site.

Time Warner has been talking to both Yahoo! and Microsoft, seeking the opportunity to combine the AOL advertising business with either. EarthLink Inc., however, signaled last week its interests in buying dial-up businesses.

“A separation of AOL would eliminate what's been a drag on growth and a management distraction,” said to Christopher Marangi, associate portfolio manager at Gabelli & Co. and a Time Warner investor, according to Reuters. “We look forward to hearing more about structural alternatives there.”

AOL revenue declined 16 percent in the second quarter, with a 29 percent drop in subscription revenue and 604,000 subscribers lost. It had with 8.1 million U.S. subscribers at the end of the quarter, according to BNET.

Online ad revenue increased two percent, due to the fact that the growth in ads displayed on sites not owned by AOL compensate a decline in display ads on AOL-owned sites. Operating income dropped 36 percent.

“Some of (Time Warner's) businesses most exposed to advertising, like a lot of the other companies that reported so far, did worse on revenue, but had other revenue sources like subscriptions to offset that,” said David Joyce, analyst at Miller Tabak & Co LLC, Reuters reported.