Time Warner’s $4.2 Billion AOL Fire Sale

When AOL CEO Tim Armstrong isn’t busy hiring former Google executives, he’s preparing for his company’s spinoff from the Time Warner (TWX) mother ship, which is is supposed to happen by the end of the year. So when it does, how much will the Internet company be worth? Try $4.2 billion, says JP Morgan analyst Imran Khan.

Khan’s estimate is the first one I’ve seen floated in public so far. The analyst has proven to have a pretty good grip on AOL’s business to date, so I’m taking it seriously.

But for the record, note that not only is the $4 billion number a pittance of the company’s value during the original Web boom (remember those days?), it’s also marked down from the $5.5 billion Google assigned to the company when it wrote down its five percent stake earlier this year. Which was, of course, a markdown from the $20 billion value Google (GOOG) had given it in 2005.

UPDATE: Pali Capital’s Rich Greenfield also pegs AOL at “around $4 billion.” Greenfield is also in the growing group of people who think Time Warner is likely to sell off its Time Inc. publishing unit. I think otherwise, but this will be interesting to watch.

Here’s how Khan got to his number (click chart to enlarge).