AOL Would Face Cold World Alone

Updated from 3:24 p.m. EST

In the end, even Steve Case abandoned his baby.

The 44-year-old Hawaii native on Sunday night walked away from the online service he nursed from obscure infancy into by far the most popular Internet portal in the world. The question now is whether AOL Time Warner(AOL Quote) will do the same.

There's plenty of reason to think it might. Since its inception as the harmonic convergence of old media and new, AOL Time Warner has buckled under the weight of its own flawed vision. It's been the focus of a Securities and Exchange Commission investigation into dubious business practices of its online unit. It took a gigantic $54 billion charge early last year to write down the declining value of the online unit, with another $10 billion to $20 billion reportedly in the offing.

The combined stock has lost 80% of its value since the merger was completed. And now, with Case gone, analysts say the one remaining obstacle to removing this albatross from Time Warner's neck has been eliminated.

Alone Again

Although no transaction is in the works at the moment, Case's departure means that none of the deal's original architects remain atop the merged company. His exit has reignited months of Wall Street scuttlebutt that the parent plans to either spin off or sell its money-draining online unit so it can focus on its still-profitable publishing and cable operations. Some see the removal of AOL from the corporate name as practically a foregone conclusion.

Outside of America Online's headquarters in Dulles, Va., "the rest of Time Warner wanted to get rid of AOL," said Cynthia Brumfield of Broadband Intelligence, a research firm that tracks the company. "Most [AOL] media executives see no growth prospects for AOL and only continued drain on morale, financial resources and its stock price."

"They're all for selling it or spinning it off," she added.