Yahoo May Be Offering To Buy AOL For $5-$8 Billion; Hires Bain To Cut Costs

Posted Sep 24, 2008

Carl Icahn, John Chapple, and Frank Biondi had their first meeting as new Yahoo! Board members this past Monday.  What happened after the meeting?  A rumor that Yahoo! Inc. (NASDAQ:YHOO) may buy AOL from Time Warner Inc. (NYSE:TWX) for $5-$8 billion.  This time Yahoo! propositions ?are more serious than has been reported? according to AllThingsD.

Time Warner CEO Jeff Bewkes stated that the future of AOL may be decided soon.  While the rumor is that Yahoo! is offering $5-$8 billion, Time Warner seems to be pushing for $10 billion.  This isn’t the first time this year that Yahoo! was forced to play the negotiation game.

Yahoo! did this same dance with Microsoft Corporation (NASDAQ:MSFT) in February.  Yahoo! wanted over $44.6 billion to be acquired by the software giant, which ended the talks between them a couple of months ago.  AllThingsD also pointed out that AOL doesn’t really have the best bargaining chips when it comes to make a deal happen.  AOL has been bouncing around with Compuserve, Netscape, and Time Warner and the best things have not come out of those deals.

To make things even more interesting Carl Icahn went on CNBC’s Fast Money on Friday, September 19 and stated that he thinks if Yahoo! doesn’t do something with Microsoft, Google will kill them.  Both Yahoo! and AOL are in a vulnerable position.  This is also why Yahoo! has enlisted Bain & Company to help them cut costs.

Below is the e-mail that Jerry Yang about the hiring of Bain:


it’s time for another update.

as a company, we’ve made some great progress this year. while it
hasn’t been easy, especially in light of the challenges we?ve faced
(not to mention the current downturn in the macro economic
environment), we’ve accomplished a tremendous amount and we?re all
working hard to continue executing on the company?s strategic plan.

as we look ahead and to position us for success in 2009, we?re
continuing the work already underway to get fit as an organization:
actively looking for ways to make process and structural changes to our
business that will allow us to work more efficiently, with more scale.
we?ve enlisted the help of Bain & Co. to work with the leadership
team on identifying ways to leverage our strengths, and to improve and
accelerate our performance.
we all know and experience parts of yahoo! where we can do better and
be more agile in a competitive marketplace. this is consistent with
what you told us in the YEES survey conducted in may ? we need to find
easier ways to work within yahoo!, and more importantly, create an even
better experience for our customers and users.

each one of us will play an important role in this process. in the
coming weeks, we?ll be soliciting your input and feedback. i want to
know how we can improve the way we work with each other, and the way
others work with yahoo!.

i know that yahoo! can benefit greatly from more discipline among
all departments and functions, across the company. longer term, getting
fit now will enable us to be more successful moving forward.