Analysts suggest Time Warner should sell AOL
By Erina Lin, Tuesday 18 September 2007 at 22:33 :: Media Ownership :: #576 :: rss
Time Warner and AOL's honeymoon period seems to have come to an end, as some analysts are strongly suggesting that Time Warner should cast off the online service company.
Some analysts suggested Time Warner could have sold AOL for about $20 billion about a year and a half ago, when Google, Comcast, and Microsoft were strongly interested in buying AOL, which had renewed its worth with a resurgence, especially in the search traffic area.
But now, the online service is considered to be worth much less, due to mediocre business moves. Michael Morris, a UBS media analyst, has revised his value of AOL down to $13 billion. The lower value indicates "a slower growth operating model and a more challenging environment," he wrote in a report.
Morris is not the only one. Many other analysts also pointed out that AOL has not presented a clear strategy in the highly competitive online ad market, Media Post has reported.
A week ago, Richard Greenfield, a media analyst from Pali Research, was much more critical.
"AOL's new management team was clearly caught off guard by the developments at AOL in Q2, raising our concern about its ability to run/turn the business around (which is particularly important given the company's desire to maintain its current asset portfolio rather than break up the company)," he wrote.
Those developments in the second quarter were about the continued advertising weakness of the business – which, according to Greenfield, were followed by rumors of a "new massive round of layoffs."
Greenfield said he had "lost faith/trust in Time Warner's executive management team and Board of Directors.”
For USB's Morris, this meant a downgrade for Time Warner from a "buy" to a "neutral." He was also concerned about Time Warner Cable's future, considering increased competition from phone communications companies like Verizon and AT&T.
Greenfield said he believes, much more directly, that AOL should be sold quickly - either as a whole company or in pieces- in order to give Time Warner maximum value.
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