In an effort to better
situate its struggling cable unit, Time Warner CEO Jeff Bewkes announced that
Time Warner Cable will be spun off into a separate company.
“We've decided that a complete structural separation of Time
Warner Cable, under the right circumstances, is in the best interests of both
companies' shareholders,” said Bewkes. “We're working hard on an agreement with
Time Warner Cable, which we expect to finalize soon.”
CNN Money reports
that the Time Warner will execute the spinoff of its cable unit by giving its
84% stake in the cable unit to shareholders.
Some analysts predicted a cable divestment by Time Warner,
due to its stakeholders’ desire to simply its “sprawling
corporate structure.” Last year, the media conglomerate offered 16% of the
company up for sale in an IPO, which
analysts valued at $5.5 billion.
With Time Warner’s share price sagging at 2003 levels – it
had a brief spike at the beginning of 2007 – Bewkes is faced with a tough
burden, manifesting as three separate tasks: figuring out what to with Time
Warner Cable is one of them, along with jumpstarting the company’s AOL unit and
improving its entertainment businesses. In the recent past, analyst murmurs
predicted that the company would look to sell off its AOL unit completely – despite
Time Warner’s statements to the contrary.
In any case, a decision to jettison Time Warner Cable is
only the latest in a series of corporate restructures, which include a substantial
$116 million reorganization of New Line Cinema.
Time Warner Cable is the United States’ second largest ISP,
trailing only behind Comcast. Aside from a minor
spat with Verizon over its characterizations
of Verizon’s FiOS service, the cable giant has largely avoided the public
spotlight – unlike its larger competitor, which is continually finding itself
in a wrestling
match with critics, the FCC, and the ISP industry as a whole.