• This is a partial transcript from Your World with Neil Cavuto, August 8, 2003, that was edited for clarity. Click here for complete access to all of Neil Cavuto's CEO interviews.

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    NEIL CAVUTO, HOST: They hailed this as the greatest, biggest, baddest merger of all time. AOL (search) and Time Warner (AOL). New media meets old media. New media dictates to old media.

    Today, the culmination of a stunning turn of events. Old media dictating to new media. AOL, you’ve got mail. And it goes something like this. You’ve got to go.

    Looks like AOL Time Warner may be one step closer to being just Time Warner, a reflection as much about AOL’s stunning turn of fortune, as a realization that maybe the biggest merger in corporate history was a bad idea then and an even worse idea now.

    In a stunning twist, management at AOL and management at Time Warner have been pushing to formally dissolve a pairing that made sense on paper but performed miserably in reality. Is getting rid of AOL in the name the first step in getting rid of AOL at the company?

    Let’s ask Porter Bibb, the managing director at Mediatech Capital Partners, and Reese Schonfeld, the founding president of CNN, of course, an AOL Time Warner unit.

    Reese, ending with you, begin with you. Do you believe these rumors? Now that they’re not so much rumors.

    REESE SCHONFELD, CNN FOUNDING PRESIDENT: Yes. They’ve been going around for a long time. Dumping AOL seems to me like much ado about very little and maybe much ado about nothing.

    For months now, there have been reports that they want to spin it off, that they want to sell it off, I don’t know. And they’re in trouble.

    They’ve got $8 billion in debt still to reduce before the end of the year, and maybe they’ll find somebody who will buy AOL and help them there.

    But I think they want to get rid of it entirely, and I think it’s a shame. I think they’ll buy and sell -- they bought at the high and they’re selling at the low, and I also think there’s nobody in that company now what you call AOL management.

    They’re a bunch of new guys who were never there in the beginning, and I don’t think they have anybody in that company who knows how to run AOL and maybe they ought...

    CAVUTO: But it’s interesting when you see this famous handshake, Steve Case and Jerry Levin. The idea was, Porter, that new and old media would come together and it would make great synergy and that it would be a sign of other companies doing the exact same thing, and it seems like zillions of years ago. It was only three-and-a-half years ago.

    PORTER BIBB, MEDIATECH CAPITAL PARTNERS: Only three-and-a-half years ago, but then was then, now is now, and remember it was also not just the new media. It was the new economy, a whole new paradigm of economic indexes and measurements.

    All of that’s out the window right now, and I agree with Reese. He’s right on the money. This is the first step toward divestiture, and they’ve got to do it quickly.

    CAVUTO: When you say divestiture, what do you mean by that?

    BIBB: They’re going to sell the online business.

    CAVUTO: And AOL goes?

    BIBB: Absolutely. They have to.

    CAVUTO: Who buys? Who buys?

    BIBB: Well, there are a number of really, really terrific candidates who could benefit.

    CAVUTO: Give me a couple.

    BIBB: The telephone companies: Verizon (VZ), SBC (SBC), Qwest (Q). Any of the big ISPs, the Internet Service Providers: Yahoo! (YHOO)

    CAVUTO: Why would they want a service that’s down a million subscribers and losing them fast?

    BIBB: Because it’s got a million and a quarter free cash flow that’s going to last for at least two or three more years.

    CAVUTO: It’s a billion and a quarter.

    BIBB: Billion and a quarter. And it’s got 25-million paying subscribers averaging $23 a month.

    CAVUTO: Does that make sense? Selling it to a telco?

    SCHONFELD: Yes, but I always wonder if the telcos have cash. AOL can’t afford to take it in stock.

    CAVUTO: Microsoft (MSFT) has cash.

    SCHONFELD: Microsoft has cash.

    CAVUTO: Microsoft has MSN, an AOL rival.

    SCHONFELD: Yes, but Microsoft and Yahoo! both may have antitrust problems.

    CAVUTO: So they’ll hold back.

    BIBB: I’m not sure Yahoo! does. Microsoft, of course, is treading on egg shells in Washington, but...

    CAVUTO: But Time Warner, by the way, would keep some of the broadcast operations, like CNN. Time Warner would hang on to that, and...

    BIBB: Oh, no, no. Just the online business.

    CAVUTO: So just the online business that goes.

    BIBB: The business that Jonathan Miller was brought in to run, to turn around, to put a new business model to, absolute failure. They have no business model.