Yahoo! (NASD: YHOO) is about to approach Time Warner (NYSE: TWX) about a tie-up with AOL. That is according to The Times in the UK.
And, why not? Almost every other possible combination of big web portals is on the table now that Microsoft (NASDAQ: MSFT) had made a $31 bid for Yahoo!, which the company will turn down as too low.
AOL does have a search advertising deal with Google (NASD: GOOG). Since Google does not want to have Yahoo! in the hands of Redmond, it might waive that obligation. Yahoo! together with AOL is not much of a threat to Google. Together the two companies might have 22% of the search market to Google’s 60%. Unlike Microsoft, AOL and Yahoo! would not use their platform to launch server-based software against Google’s word processing and spreadsheet businesses.
A minority position in Yahoo! would solve a problem for Time Warner. Now that it has decided to get rid of AOL’s internet service provider dial-up business, it has a large internet portal with no search engine capacity of its own. While locked inside Time Warner, the value of AOL is hidden. That would not be true if Time Warner owned, say, 40% of Yahoo!.
There are enough odd-ball combinations in play among the portals that an AOL tie-up with Yahoo! just might work.
Douglas A. McIntyre
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