Keep An Eye on Time Warner

Today, all eyes are likely to be on the proposed Microsoft/Yahoo deal. Rumor has it that Yahoo plans to reject the offer, saying it's not rich enough. I'll have more to say on this later.

However, there's another potential deal floating around that's gotten much less play, and I thought I'd mention it here.

Last month on January 1st, Jeff Bewkes became the new CEO of Time Warner Inc. after serving two years as president of the company.

Bewkes worked his way up the line, starting out as the CFO of HBO for five years (during the period when Time--parent company of HBO--merged with Warner Communications, making HBO a part of Time Warner).

He went on to become president of HBO in 1991, and then served as CEO of HBO from 1995 to 2002. In 2002, he moved up to chairman of Time Warner's entertainment and networks group and then became president of Time Warner, Inc. in December, 2005 under CEO and Chairman Dick Parsons. With Bewkes' latest promotion, Parsons gives up the CEO title, but will remain chairman.

On February 6, Bewkes spoke with investors for the first time as CEO. He described a restructuring of AOL and talked about separating AOL's Internet business from its advertising business.

That raised investor hopes that the new CEO planned to spin off the AOL Internet business, which has been hemorrhaging since Time Warner made the decision to drop the cost of subscription fees on their dial-up business in favor of trying to grow the advertising business. Portfolio.com reports "Revenue at AOL fell 32 percent, as it lost 740,000 subscribers." Those subscribers sought high-speed access elswhere. "The current total of 9.3 million subscribers is down 3.8 million from last year," according to the Associated Press.

Portfolio.com said, "While Bewkes did not outline any specific plans to combine part of AOL with another online partner, such as Google, he noted that the company was "open to strategic moves that make sense."

The timing for spinning off AOL might not be right. The Associated Press (AP) said "...those prospects became murkier last week when Microsoft Corp. made an unsolicited bid for Yahoo Inc. That would not only eliminate two likely bidders for AOL, but create a major online advertising power."

The AP also pointed out that Time Warner owns 84% of Time Warner Cable and may be considering spinning it off tax-free. However, with the value of cable stocks down, this may not be the time for that move.

Stay tuned . . .