Still, both figures exceeded the estimates of analysts, who had expected earnings of 37 cents on revenue of $6.97 billion, according to Thomson Reuters.

Revenue at the conglomerate’s studio, Warner Bros., fell nine percent to $2.3 billion despite some surprise box office hits like “The Hangover.” Meanwhile, revenue at the Time Warner (TWX) networks division was up five percent to almost $3 billion, despite a three percent drop in ad revenue.

And what of AOL? Time Warner’s soon-to-be-spun-off Internet division continued to be an albatross hung round the company’s neck. Its revenue dropped 24 percent to $804 million, dragged down by weak advertising and a continued decline in subscribers. Operating income fell 28 percent to $165 million. (See table below; click to enlarge.)

In a statement, CEO Jeff Bewkes said that Time Warner is “on track to spin off AOL to our stockholders around the end of the year. Separating AOL will benefit both companies–enabling Time Warner to concentrate fully on our core content businesses and improving AOL’s operational and strategic flexibility.”

Let’s hope so.

Now, according to a regulatory filing, Google (GOOG) has gone and sold its share back to Time Warner (TWX) for $283 million, about a quarter of what it originally paid. Which means that in four years, AOL’s value has declined from an estimated $20 billion to an estimated $5.7 billion.

What an amazing loss of value.

According to the filing, AOL, which will be spun off by Time Warner later this year, made $678 million of the $2 billion in advertising revenue it collected in 2008 from its search advertising partnership with Google. Quite a chunk. AOL CEO Tim Armstrong best hope he’s able to renew that partnership when it expires at the end of 2010.

Yahoo-AOL would not happen anytime in the forever future. Yahoo is a much stronger property in a different direction and there’s no sense confusing all of that.

– Yahoo (YHOO) CEO Carol Bartz about a hook-up with the Time Warner (TWX) online unit.

Brand new MySpace CEO Owen Van Natta started things off Monday with his first day on the job. He was joined by new COO and former AOL exec Mike Jones and new chief product officer and former Sling Media exec Jason Hirschhorn. Down in Los Angeles at the AlwaysOn OnHollywood conference, Boomtown ran smack into Huff Post mastermind Arianna Huffington, who extolled the virtues and abilities of new managing editor Jai Singh, former editor-in-chief of CNET Networks. At AOL, in preparation for spinning off the Time Warner (TWX) Online unit, new CEO Tim Armstrong began appointing new senior execs and spinning off existing ones. Platform-A president and former Yahoo (YHOO) sales exec Greg Coleman, who joined the AOL team in February, is leaving the company, to be replaced by Jeff Levick, who is leaving Google (GOOG)–where he had a close relationship with Armstrong. CFO Nisha Kumar is also leaving AOL, and a search is underway for her replacement. MediaMemo has more on Time Warner’s decision to spin off AOL. A number of Flickr engineers were laid off Wednesday, but Chief Architect Cal Henderson has left the company of his own accord and is working on a stealth start-up with Flickr co-founder Stewart Butterfield. Last, but not least, one of the voices covering the digital scene has found a new gig. Owen Thomas, self-described “scourge of [Silicon] Valley,” is leaving Valleywag to head up GE (GE) unit NBC Universal’s new “Bay Area” Web site, whose motto is “Locals Only.” He’ll be replaced by fresh-faced Ryan Tate, recently the night editor for Gawker. Both reporters talked to BoomTown on Friday about the changes.

MediaMemo wrote on Monday about Condé Nast shutting down Portfolio–both the print magazine and the accompanying Web site. On a cautionary note, MM outlined the reasons why Portfolio’s business magazine peers should not celebrate the loss of a competitor, even (or especially) during tough economic times. Is the meteoric ascension of Twitter flattening out? According to a Nielsen Online study, 60 percent of Twitter’s users leave after a month. This was met with a lot of skepticism so Nielsen ran the numbers again with the same results–and this time it’s sticking with them. MediaMemo also had an explanation for why the long-awaited deal between Disney (DIS) and Hulu took months and months and millions of dollars to finally come together. Digital Daily had more on that story.

Digital Daily also had more info on the ever-evolving Palm (PALM) Pre story. First, a rumor that Palm plans to launch the handset on June 7–which would be crazy, given the fact that June 8 is both the first day of Apple’s (AAPL) Worldwide Developers Conference and the day that those in the know expect the next-generation iPhone to drop. Then, there’s an assertion by Collins Stewart analyst Ashok Kumar based on supply chain research that Palm has greatly reduced its production numbers. Time will have to tell, though, because Palm certainly isn’t talking yet. Of course, things could be worse. Dell (DELL) hasn’t even solidified plans for its rumored smartphone, and already, no one really cares.

Dell’s new Adamo laptop and Studio One 19 desktop aren’t causing much excitement either. In this week’s Personal Technology column, Walt Mossberg reports that although both machines look good and function well, neither is groundbreaking. In Mossberg’s Mailbox, Walt answered readers’ questions about improving performance on a PC, using peripheral devices with an iPhone and installing Apple’s OS X on a Windows machine. And in this week’s Mossberg Solution, Katie Boehret tested three apps from the iTunes App Store that make it possible for the iPod touch to function like an iPhone.

More next week.

Welcome back to Weekend Update, where we showcase some of the highlights from this site over the past week.

In the umpteenth round of the old media versus new media match, the Associated Press in its annual meeting this week played into the stereotype of the grizzled no-nonsense editor who shakes his fist at the new interweb thing (or was it intertube?) and its feisty friend Google News, who are running amok on his lawn. In addition to trying to “protect news content from misappropriation,” AP board chairman and MediaNews group CEO Dean Singleton emphasized that print was the “meat,” while online was merely the “salt and pepper.” Unimpressed, BoomTown thought Singleton was singling out the steak while missing the sizzle.

In response, Google (GOOG), or He Who Was Not Named, posted a polite, if rather ambiguous, statement on its public policy blog, which was just begging for translation. Also doing some interpreting of his own, AP executive Jim Kennedy spoke with MediaMemo on just what all the fire and brimstone was about. In quieter newspaper-related news, The Wall Street Journal continues on its quest to spread pay content online, possibly through niche content, according to WSJ.com Executive Editor Alan Murray. Also experimenting online is the recently opened news Web site, True/Slant, a heady combination of journalism, social networking and advertising.

Another news item that’s gotten people talking is the fallout from the collapsed IBM-Sun merger, aka Sun pulls a Jerry Yang. (Oh Jerry, the Internet kids because it loves… loves to kid! Pwn-age.) Following the news of the collapse, Sun (JAVA) shares dropped more than 27 percent, leading analysts and Digital Daily to predict difficult times ahead for the company, here and later here as the stock continued its fall over the week. Besides quashing its own stock price, Sun also quashed rumors that chairman and co-founder Scott McNealy would replace CEO Jonathan Schwartz.

Other nonthematic highlights this week:

BoomTown got the exclusive on the anticipated talks between Yahoo’s (YHOO) Carol Bartz and Microsoft’s (MSFT) Steve Ballmer in which the two CEOs discussed the possibility of a search and advertising partnership. Speaking of exclusivity, Google and Microsoft like totally want to be Twitter’s new bff, or maybe go steady if Twitter’s interested.

Digital Daily ruminated on speculations of Time Warner (TWX) doing an AOL spinoff, especially after its hire of former Google exec Tim Armstrong and its attempts to amend debt agreements as per an SEC filing. Also in the rumor mill: The iPhone 3.0 may support onboard video editing. Less of a rumor and more of a slap in the face, to Apple (AAPL) at least: Elan Microelectronics has taken off the gloves (and taken up the lawsuit) because it believes that Apple’s products infringe on its touchscreen patents.

MediaMemo goes over the facts about Vevo, the new online music video hub that’s a partnership between Google’s YouTube and Vivendi’s Universal Music Group, with interesting ramifications for both. Meanwhile, iTunes has put in place its new tiered-pricing system, in which songs will now cost 69 cents, 99 cents, or $1.29. But in a question that shocked no one: Where are the all the lowest-tier songs? Don’t worry your pretty little heads, said Big Music, they’re on their way.

In a new Mossblog, Walt Mossberg reports from the battlefield of the growing Smartphone Wars, in which iPhones, BlackBerries and others are engaged in mortal combat. In the Mossberg Solution, Katherine Boehret reviews BumpTop, an application that takes your flat, plain old X-Y plane of a desktop to the next dimension, that is, the third dimension.

More next week!

For instance, BoomTown was in Rome earlier this week attending a conference on business, brand and innovation that happens only once every seven years–and one of the biggest takeaways? Hardly any Italians have heard of Twitter, and those who have don’t really use it. Well, that, and conversations with Arianna Huffington, Reid Hoffman, and several Italian business leaders. Mark Zuckerberg, though, is most definitely plugged into the white-hot microblogging service. This week, he used his Twitter account, plus an appearance on “Oprah,” as a platform to herald the launch of Facebook’s own Twitteresque homepage redesign. In other news, Time Warner (TWX) CEO Jeff Bewkes laid off AOL President and COO Ron Grant and Chairman and CEO Randy Falco. BoomTown interviewed Falco’s replacement, Google (GOOG) ad sales exec Tim Armstrong, who’ll start at AOL as Chairman and CEO on April 7.

MediaMemo had the full memo from Time Warner on the Falco/Grant-Armstrong transition and also spoke with Boxee CEO Avner Ronen this week. Boxee is the start-up that lets you watch Web video on your TV, basically bypassing your cable box. Which is probably why it’s caught up in a cat-and-mouse game with Hulu, the joint venture between GE’s (GE) NBC and News Corp.’s (NWS) Fox that would much rather have you watch TV on the Internet instead. Guess who’s the mouse? Still, Hulu is down two networks, ABC and CBS (CBS)–though presumably, the aim is to offer all three. (News Corp. is the owner of Dow Jones, which owns this Web site.) MediaMemo also noted that Google rolled out its behavioral targeting functionality this week and points out that we all might be hearing a lot more from a man named Rick Boucher in the near future as a result.

Behavioral targeting wasn’t the only thing that Google rolled out this week–it also launched Google Voice, the initiative based on the company’s acquisition of voice communications start-up GrandCentral. Digital Daily covered the story. Elsewhere in the telecom world, major Palm (PALM) investor Roger McNamee made some bold (read: crazy) assertions about iPhone users switching en masse to the Pre, which later needed to be clarified (read: backed away from) by Palm itself. RBC analyst Mike Abramsky is also bullish on the Pre and its WebOS, but in a less crazy way. He gave it a glowing write-up on Friday. For a product that hasn’t yet been given a price or a launch date, it’s certainly building itself some high expectations. Of course, it’ll need to fulfill them to compete with the ever-evolving iPhone, which for which Apple (AAPL) is having a press event Tuesday to announce version 3.0 of the device’s OS.

Walt Mossberg reviewed the new version of Apple’s ever-evolving iPod Shuffle this week, which has the distinction of being the first mp3 player to “speak.” His verdict was in Wednesday’s Personal Technology column. In Mossberg’s Mailbox, Walt answered questions about using a stylus with the iPhone and offered an explanation on how to change Apple’s Safari 4 beta so that it looks and works more like the previous version. And in this week’s Mossberg Solution, Katie Boehret took a look at iSkoot’s Notifier, an app designed to endow basic cellphones with smartphone-like capabilities.

More next week. And beware the Ides of March. Or not.

Marked by panic selling and wet-your-pants fear, it was one of the worst weeks in the financial world’s history–a week that cut the legs out from under Google (GOOG), beat Yahoo until its market cap bled purple and caused the Dow Jones Industrial Average to swing more than one thousand points on an intra-day basis.

It was a week that saw Sequoia Capital warn its portfolio companies to prepare for a protracted downturn or, in the words of partner Michael Moritz, be “spattered on windshields and radiator grills and be forgotten.” Turns out Bubble 2.0 sounds a lot like Bubble 1.0 when it pops.

Beneath the screams of agony echoing across Wall Street, there was other news worth noting:

• Advanced Micro Devices (AMD) announced plans to spin off its manufacturing operations.
• “Legal” turned out to be a poor choice of adjectives for RealNetworks’ RealDVD (RNWK), the company’s new “legal” DVD ripper. A judge extended the temporary restraining order barring the company from distributing it.
• This just in: Time Warner’s (TWX) AOL and Yahoo (YHOO) are still talking about a merger and Generalissimo Francisco Franco is still dead.
  Where is Microsoft (MSFT) in all this? Sitting on the sidelines hoping the deal will go through.
• Finally, activist investor Eric Jackson, the creator of the Yahoo! Plan B investor community, revealed Yahoo! Plan C: his hedge fund’s divestiture of its Yahoo stake.

So perhaps this means that those talks are about to become more serious still. Time Warner (TWX) CEO Jeff Bewkes did say earlier this month that AOL’s future “will probably get decided fairly soon.”

And if it does and the company is able to ditch AOL on Yahoo? Well, as I’ve said before, Yahoo (YHOO) will no doubt spin such a combination as one that would bolster its domestic market position. But rather than a synergistic powerhouse, a merger of these companies is more like two louts coming together to make one cretin. Not exactly a proven formula, considering recent history. AOL+Compuserve = FAIL. AOL+Netscape = FAIL. AOL+Time Warner = FAIL. AOL+Yahoo?