Preparing to Split
The formal admission by the Silicon Valley Internet giant that the value of its investment may have fallen follows recent moves by Time Warner to shape up AOL for a possible sale.
Time Warner, which has been considering how it might dispose of AOL in order to focus on its core media properties, said on Wednesday it plans to split AOL's dial-up unit from its advertising business by early 2009.
The move is a major step toward the eventual sale of one or both of the businesses, and would allow Time Warner to move beyond the troubled legacy of its 2001 mega-merger with America Online, which was then hailed as the "Deal of the Century."
On July 1, Google received the right, but not the obligation, to force the media conglomerate to bring its Internet unit to the market, under terms of their 2006 deal.
But at current market valuations, Google stands to lose an estimated $500 million if AOL is spun off, analysts estimate.
AOL's $20 billion valuation, established at the time by Google's $1 billion investment, has been cut by roughly half to as low as $10 billion by some published projections.
In the six quarters ending last December, AOL shed nearly half of its total subscribers, as 8.3 million cancellations left it with 9.3 million paying members.