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Last Updated: Wednesday, 10 November, 2004, 13:44 GMT
AOL to split business into four
AOL website
Demand for fast internet connection is expected to keep growing
AOL, the world's largest internet services provider, is to split itself into four separate divisions.

The firm, which is owned by media giant Time Warner, is carrying out the move to cut red tape and boost profits.

Three top executives will also leave the company, which has already announced plans to trim the workforce by about 4%, or 700 employees.

AOL has seen its number of subscribers shrink in recent years amid fierce competition in a crowded sector.

Slippery slope?

In 2003, the firm lost 2.2 million internet members, though Time Warner chief executive Richard Parsons said earlier this year that AOL had been "stabilised".

The firm has been facing criticism from a number of quarters.

It's easy to find third party services which are as good as, if not better, than AOL
Lorenzo Wood, Oyster Partners

Part of the problem has been a backlash against AOL's dominance, coupled with the difficulty of holding onto market share in the face of increased competition, analysts said.

But there also have been questions asked about the firm's strategy.

Expensive structure?

AOL is an internet service provider that also gives users access to a wide range of additional services, rather than a simple "pipeline" to the world wide web.

Using AOL's own browser, users can visit chat rooms, forums and gain access to exclusive media downloads and areas.

However, the cost of these services may outweigh the benefits because similar products are available elsewhere on the internet, analysts said.

"It's easy to find third party services which are as good as, if not better, than AOL," said Lorenzo Wood, head of strategic services at consultancy group Oyster Partners.

Break-up

AOL is far from crumbling, however.

Analysts point to the fact that the firm is one of the best-known and dominant internet providers, with subscribers that - despite the recent drop in numbers - are very loyal.

AOL is optimistic about the future and will be split into a four divisions called Access, Audience, Digital Services and AOL Europe.

Each will be responsible for making its own financial and operational decisions.

The executives leaving the firm, meanwhile, are Lisa Hook, president of AOL Broadband, and J Mike Kelly, chairman and chief executive of AOL International.

Joe Rip, AOL vice chairman, will move to a management position in Time Warner.




SEE ALSO:
AOL purchases internet advertiser
24 Jun 04 |  Business
Bertelsmann pays out in AOL case
30 Jan 04 |  Business
Time Warner 'returns to health'
28 Jan 04 |  Business
DoCoMo to sell AOL venture stake
17 Dec 03 |  Business
AOL lets down Time Warner
22 Oct 03 |  Business
What's in a name?
19 Sep 03 |  Technology


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