The AOL-TimeWarner merger never was a match made in heaven, but now they may be preparing to divorce. Time Warner Inc. (NYSE: TWX), parent company of the two divisions, announced a broad restructuring plan today that would separate AOL’s internet-access business and potentially reduce its holdings in the company’s cable affiliate. The news comes after the company posted somewhat disappointing earnings - driven by cable television - and guided lower for the year. Shares moved up, however, on news that the company may finally be ready to undergo the drastic restructuring that it so desperately needs.

Chief executie Jeff Bewkes, who assumed his post earlier this year, laid out his turnaround plan alongside Time Warner’s earnings this quarter. The new plan calls for a separation of AOL’s internet-access business, a reduction the firm’s 84% stake in Time Warner Cable Inc. and aggressive cost cutting measures across the board. The news comes after the company reported that its fourth quarter net income slid 41% (due to gains last year), but met expectations with the help of blockbuster hits “Harry Potter” and “I Am Legend”. Meanwhile, the company’s stock sits between its 52-week highs and lows as investors are again preparing to wait.

Perhaps the most interesting portion of Time Warner’s turnaround plan is the restructuring efforts surrounding AOL in particular. Many believe that this could mean a sale of spin off of AOL’s internet-access business, which has been losing customers and seeing lower revenues as it continues to drop its subscription fees. It could also be a precursor to a merger with another online company in order to make it more competitive against rivals Google and the new “YahooSoft”. Others believe that Time Warner may be leaning down its AOL business in order to encourage a bid, fresh after Microsoft’s blockbuster bid for Yahoo. Perhaps a strategic acquisition or two would make it a key player worth a second look by Google or others.

In the end, Time Warner’s restructuring is long overdue since its failed merger all those years ago. It will be interesting to see how Bewkes takes action to turn around the troubled company and restore it on a path of profitability. Combined, these factors make TWX a stock worth watching!

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