Companies:Google Inc | Time Warner Inc

Time Warner [TWX Loading... () ] CEO Jeff Bewkes gave investors hope that soon they'll heave a sigh of relief, saying a decision on AOL's future will come "very soon." Soon can't come soon enough. For years AOL has been the Albatross hanging around Time Warner's neck. And now more than ever, it's clear that AOL doesn't fit with the rest of Time Warner's business, which post Time Warner Cable spin-off, is all about content. The company even used its first quarter earnings report as an opportunity to break out AOL as an entirely different type of businesses. There's the company's "Content Group" -- its cable networks, movie studio, and publishing -- and then there's AOL. The company seems determined to show investors just how strong it is with AOL out of the picture.

Time Warner managed to beat analyst expectations, though dragged down by AOL first quarter profit dropped 14 percent. Its cable business showed a 2 percent drop in ad revenue (not bad in this market), and the division outperformed its peers and managed to show earnings growth. The film studio showed remarkable double digit earnings growth. AOL suffered the brunt of the downturn in the advertising market, its ad revenues off 29 percent. Declining subscription revenues, which are a given for the online business, revenues were off 23 percent.

So what's the plan for AOL? The company won't confirm that it's definitely spinning AOL off -- keeping its options open -- but that's exactly what it's readying to do. Bewkes and team notified Google, which currently owns a 5 percent stake in AOL, that it plans to buy out that stake. This is no surprise, earlier this year Google [GOOG Loading... () ] asked Time Warner to take this step. Owning AOL in its entirety will make it easier for Time Warner to sell or spin off the business, and AOL would retain its key Google search partnership.

Meanwhile Time Warner's other Albatross, its Time Inc. magazine division, also posted a 23 percent revenue drop. The magazine biz hasn't gotten as much buzz as AOL of late, but its performance has also raised questions about whether it should be spun off. Bewkes is sticking by his magazine empire, which includes Sports Illustrated, People, Time, and Fortune Magazine. He's counting on business to return along with the economy and he boasts that Time Inc. has aggressively shifted its content online. The division generates 15 percent of its U.S. ad revenue from the Internet, more than its peers. From my perspective, while that's a great start, it's only the beginning of what magazines will will need to do to compensate for shifting and declining ad dollars.

Now everyone's waiting for the next step. How soon is "not too long from now?" and "very soon?" Time Warner has strong prospects to help it ride out the recession. Its TV Everywhere concept its testing would generate additional revenue and provide more value for customers. And its movie studio has the top market share, by quite a significant margin, so far this year, and it continues to have top market share in terms of home video. The company is in good shape, with little exposure to advertising other than AOL and Time Inc. But it seems that not until Time Warner gets rid of AOL will Wall Street give the stock a boost.

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