Microsoft, Buy AOL Since Yahoo! Won’t Accept

Posted Jul 17, 2008

This past weekend, Yahoo! Inc. (NASDAQ:YHOO) turned down another offer from Microsoft Corporation (NASDAQ:MSFT).  In the meantime, Time Warner Inc. (NYSE:TWX) is looking for a buyer to sell off the AOL LLC.  Executives at Microsoft, Yahoo!, and Time Warner have all hinted that there is a renewed interest in selling AOL.

?I don?t see why anyone would make a move now with all the pieces on the chess board where they are,? stated Richard Greenfield, an analyst at Pali Capital that covers Time Warner.  Greenfield added that Time Warner will have a tough time because AOL’s value is declining.

If Microsoft or Yahoo! decides that they are interested in buying AOL, things might become slightly tough from a paperwork standpoint because Google Inc. (NASDAQ:GOOG) bought $1 billion worth of shares in AOL (5% of the company) around December 2005.  AOL search is also powered by Google.  As a major shareholder, Google will have a large influence on whether AOL gets sold or not. 

Whoever ends up buying AOL will instantly have access to one of the top three used instant messaging platforms.  AOL’s AIM has well over 40 million users.  And that can be huge for advertising.  We all know how the big three search engines (Yahoo!/Microsoft/Google) are hungry to advertise since they’ve all bought digital advertising companies for a combined price of roughly $10 billion.

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