According to reports, the company will announce the charge on January 29 as part of its full-year results, but has warned Wall Street analysts that a substantial cash charge will be taken. It is the second large write-down made by AOL Time Warner, which last year recorded a write-down of $54bn.
However, the media giant has also said that it does not expect the $10bn write-off at AOL to impact on its credit facilities or to put the company in danger. It says that the charge will not affect its earnings before interest, taxation, depreciation and amortisation figure.
AOL Time Warner has been looking at how to revitalise the America Online unit of the company and rejigged the unit's senior management. This included the appointment of Jonathan Miller in August as chairman and chief executive of AOL. He joined from USA Interactive and replaced Robert Pittman. It has also made hundreds of job cuts at the division and outlined a plan to attract more revenue by offering more premium services as advertising has failed to generate significant income.
The internet division, which is the world's biggest online service, has been a source of difficulty for some time and it faces increasing heavy competition from rival Microsoft and its MSN service. AOL Time Warner faced an investigation by the US financial watchdog the Securities and Exchange Commission after it was revealed that advertising revenue had been inflated by $49m at America Online.
Shares in AOL Time Warner closed down by 1.98% on the New York Stock Exchange yesterday, trading at $13.88, a fall of 28 cents.
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