Steve Case contemplating AOL spinoff?
Another older Wall Street Journal story (subscription required) that I hadn't posted which details Steve Case's building of AOL and his frustration with the current blame game that puts him squarely in the middle. However, talk of AOL being spun back out are probably overly optimistic since the company is now dealing with over $28 billion in debt that makes any such move complicated since AOL by itself will not be able to deal with much debt.
Mr. Case spent 17 years relentlessly and zealously helping to build America Online from the ground up, and is known for his reserved personality and his deliberate management style. Under his leadership, America Online grew to be the largest Internet service provider in the world, with more than 35 million subscribers world-wide. In the past year, however, the company has had slowing subscriber growth and a steep falloff in online advertising. Online ad sales, the most profitable part of America Online's business, are expected to be as low as $1.6 billion this year, down from $2.7 billion last year.
...On Wall Street, some investors are still in favor of a spinoff. Hedge-fund manager Doug Kass, of Seabreeze Partners LP, says a stand-alone America Online should be able to fetch a hefty valuation. "Why not give it back to Case and spin it off?" Mr. Kass says. "Whoever wants to make that trade would have a huge increase in share price."
Mr. Kass sold his stake in AOL last week after the company's earnings report. Mr. Kass says he was partially motivated to sell by the fact that AOL refuses to consider a spinoff. "I wouldn't have sold all my position if the company was doing" the spinoff, he says. His reasoning is that despite its problems, America Online will likely generate about $1.4 billion in cash next year but is given very little market value. By comparison, he says Yahoo Inc. could generate as much as $300 million in cash next year but has a market capitalization of nearly $9 billion.