Report: Time Warner in talks with Yahoo, MS for AOL deal

Time Warner may be looking to sell AOL as it centers its business around content rather than distribution.

Time Warner is in separate talks with Microsoft and Yahoo to sell its AOL Internet division before Yahoo holds its annual shareholders meeting on August 1, according to a Reuters report.

The structure of the deal is unclear, according to Reuters. Unidentified sources had previously told Reuters that any deal with Time Warner would probably involve AOL's merging with Yahoo, with Time Warner taking a minority stake in the combined company, according to Reuters. However, the sources told Reuters that any deal with Microsoft would involve the sale of AOL to the software maker.

Time Warner is apparently interesting in selling AOL as it centers its business around content, not distribution, according to Reuters.

Either of these deals would help position Yahoo or Microsoft to better compete with Google Inc.

Microsoft declined to comment on the report. Neither Yahoo nor Time Warner could be reached for comment.

A Microsoft deal with AOL makes sense if Microsoft's goal is to increase traffic, said Allan Krans, an analyst at Technology Business Research Inc. in Hampton, N.H.

"AOL is a strong third in terms of driving people to its Web site, so it could be a way for Microsoft to get some of the increased traffic that they're looking for," he said. "That's really the goal for their online services division. They have the tools to monetize and attract advertisers, it's just a matter of getting people to their Web site to generate that revenue."

And merging with AOL also be a good move for Yahoo, he said.

"Yahoo has a lot of attractive Internet properties, like Yahoo Groups and Yahoo Finance, and they do have a significant number of users that do go to the site, so that's one of the primary value propositions in the acquisition," Krans said. "With AOL you don't have quite the same level of traffic, but it's certainly one of the premier Internet properties out there."

Krans said the urgency to get a deal done before Yahoo's shareholders meeting is because the landscape could change if investor and Yahoo shareholder Carl Icahn is successful in his fight to take over Yahoo's board of directors.

"If Icahn has his way, you could see large changes on the board, and that would definitely change the direction of the company from focusing on a go-it-alone internal strategy to really marketing the company for sale and trying to negotiate with Microsoft," Krans said.

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Linda Rosencrance

Computerworld
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