UPDATE: Case, indignant, says he'll spin off AOL

ITworld.com |  Networking

AOL Time Warner Inc. (AOLTW) Chairman Steve Case is reportedly fed up with colleagues and investors likening America Online Inc. (AOL) to the albatross around AOLTW's neck and has made remarks indicating he may seek to reclaim control of the Internet unit through some sort of spin-off, a report revealed Tuesday.

The report, published in the online edition of the Wall Street Journal, is apparently based on remarks Case recently made to people close to him as the heat has been turned up underneath AOL. The struggling Internet unit of media conglomerate AOLTW has been blamed for the company's tumbling stock price and shaken investor faith. What's more, government probes into AOL's accounting have led the company to undergo an internal inquiry into the Internet unit, which has turned up several questionable transactions.

Upon reporting its third-quarter results last week, AOLTW announced that it would be restating almost two years of earnings due to the accounting problems within AOL.

With so much fire aimed at the teetering Internet division, Case, who headed AOL before it merged with Time Warner last year, has reportedly taken offense.

The newspaper reported that Case has remarked that AOL could be more successful free of the critical gaze of AOLTW.

AOLTW spokeswoman Tricia Primrose dismissed the report, however, saying Tuesday "there are no plans to spin off AOL and no serious discussion to do so."

The Internet division has been undergoing a restructuring process in recent months that has resulted in an executive shakeup and the appointment of a new AOL chief executive officer. Given the reorganization, and AOLTW's desire to steady the unit's performance, the idea of spinning off AOL was one of many suggestions put on the table, a source close to the company said. However, this idea was not given serious weight, the source added.

It is unclear if the New York media behemoth will take any drastic moves concerning AOL in the future. Although AOL released a new version of its software earlier this month, which it hopes will shore up its business and spark new subscriber growth, competition is fierce.

Rival Microsoft Corp. has also unleashed a new version of its new Internet access software which it is pushing with deep pockets and hardened resolve.

What's more, investigations by both the U.S. Securities and Exchange Commission and the U.S. Department of Justice into AOL's accounting has sullied the unit's image. Although AOLTW's decision to restate earnings based on its own internal inquiry was greeted as a positive sign that the company is working proactively to right the problems, how far the parent company is willing to go to protect AOL remains to be seen.

Amid speculation of a spin-off, shares of AOLTW (AOL) traded down 3.95 percent to US$14.10 a share in early trading Tuesday.

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