Time Warner Inc. (NYSE:TWX) enjoyed what turned out to be a great recovery in 2006. Progress has continued in 2007, but not enough to keep the stock on the rise. The recent market slide took shares back under $20 for essentially the first time this year, and now shares are down to around $18.75.
The earnings news wasn't the real issue here, and so far that $5 billion share buyback plan is largely ignored. So, here is a prediction from someone that is far from an insider but not completely an outsider (BloggingStocks is part of AOL Money & Finance).
I think AOL will become "AOL" on the NYSE again. Time Warner Inc. already spun out Time Warner Cable (NYSE:TWC) as its own controlled entity. This isn't a true independent company though, as it actually represents more of the 'tracking stock' that we saw so much of in the late 1990's. In fact, this is exactly what EMC Corp. (NYSE:EMC) is doing in the partial IPO of VMware in two weeks.
AOL is no longer the number one portal, but replacing it would be far too costly and would invoke incalculable charges after that massive merger between AOL & Time Warner. Unless changes have been made, Time Warner will have to make a monetizing event and valuation in the not so distant future as part of Google Inc. (NASDAQ:GOOG) $1 billion investment into AOL in 2005. That can of course be changed as anyone knows. Contracts are amended all the time, and more than once, and often without shareholder notice if it is not deemed material.
Spinning off part of AOL would give Time Warner a non-cash currency to make deals without having to burn through cash as well. And that allows for more dividends or share buybacks. Stay tuned for this bell to be rung louder and louder by Wall Street as the year matures. It is impossible to make a 100% prediction, but this makes the most sense in today's world. If the markets tank or if something changes drastically in the outside world, obviously all bets are off!
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