March 14 (Bloomberg) -- Time Warner Inc.'s purchase of the Bebo social networking Web site may not fix the AOL Internet unit, which will find it difficult to lure new talent and ideas under current management, UBS AG said today.

AOL said yesterday it planned to buy Bebo for $850 million to boost online advertising sales. The purchase didn't address challenges such as intensifying competition, slowing growth in social networking and declining time spent by users on such sites, Michael Morris, an analyst at UBS in New York, said in a note.

Time Warner, the world's largest media company, would be better off without AOL, Morris said. The company should invest in its Warner Bros. film studios and cable networks such as HBO, instead of focusing management efforts and resources on fixing AOL, the analyst said.

``Unrealistic expectations have been a challenge for AOL in the past as management has evaluated opportunity,'' said Morris, who recommends investors buy Time Warner shares and doesn't own any. ``Time Warner continues to invest in a business that is not a core competency and is not being rewarded by the market.''

Time Warner, based in New York, fell 48 cents to $14.03 at 4 p.m. in New York Stock Exchange composite trading.

To contact the reporter on this story: Gillian Wee in New York at gwee3@bloomberg.net.

Last Updated: March 14, 2008 16:25 EDT