Time Warner's rocky marriage to AOL is coming to an end

Citing irreconcilable differences, Time Warner Inc. said it was legally separating from its much younger spouse, America Online. The marriage, which was announced to great fanfare in January 2000, had been on the rocks practically from Day One -- doomed from the get-go by lofty expectations of a new power couple that could dominate the media landscape for generations to come.

Now a much smaller -- and less ambitious -- Time Warner will set about to rebuild itself as a content-only company while its spouse is spun off into a publicly traded Internet company. In an e-mail to Time Warner employees, Chief Executive Jeffrey Bewkes said that "with your continued support, I'm confident we have a bright future."

That future is likely to resemble that of a more constrained CBS or General Electric Co.'s NBC Universal than an expansive Walt Disney Co. or News Corp.

Aside from splitting from AOL, Time Warner earlier this year got out of the distribution business when it spun off its cable systems. Its biggest units now are Turner Broadcasting System Inc., the cable programming giant that operates CNN, TNT, TBS and Cartoon Network; pay cable channel HBO; and the Warner Bros. movie studio.

The new Time Warner was applauded by analysts.

"Spinning off AOL streamlines the remaining company both strategically and from a valuation point of view," said Laura Martin of Soleil Securities.

Bewkes' next decision will be what to do with Time Inc., the once-powerful publishing arm that houses Time, People, Sports Illustrated and several other magazines that are struggling with the rest of the print industry to remain viable in the digital age.

Speaking at the company's annual shareholder meeting Thursday at its New York headquarters, Bewkes said key priorities for the new Time Warner included making more investments abroad and running its remaining businesses more efficiently.

Cable networks would seem to be one area where Time Warner would logically look to become bigger. But cable programming is a mature industry with few opportunities for bargains. Moreover, a big acquisition would also be dilutive to Time Warner's earnings, something that shareholders wouldn't welcome.

Instead, people close to the company expect it to continue to pare down debt. Even though Time Warner socked away more than $9 billion from the cable spinoff and has paid off $7 billion in debt this year, it still has $10.4 billion in net debt on its books. That may squelch any appetite for big deals.