"Amid all the speculation about Microsoft (MSFT) buying Yahoo (YHOO), Yahoo buying AOL (TWX), etc., one thing is nearly certain: One of these transactions will eventually take place -- and probably sooner rather than later. Why? Because Google has locked up the No. 1 spot in the sector, and market won't support more than three competitors."
He also gives scenarios where Microsoft (NASDAQ: MSFT) or Yahoo! (NASDAQ: YHOO) would be a buyer of Time Warner Inc. (NYSE: TWX)'s AOL. Previously, Blodget has covered Yahoo! buying AOL and has given other scenarios where AOL could or should become part of a larger company via an acquisition.
But there are some additional issues here to consider. Let's pretend that Jeff Bewkes decided to just jettison AOL. The company still has some dial-up subscribers and it has invested much effort in its advertising platform, now renamed Platform A. Google (NASDAQ: GOOG) made a $1 billion strategic investment and the terms originally dictated that a monetizing event of some sort would come due in early 2008 (that is right around the corner).
For those of you who use AOL, you know that AOL uses the Google engine. Not Yahoo!'s, not MSN.com's, not Ask.com's -- Google's. So any buyer, be it MSN or Yahoo!, would have to consider an entire retooling of AOL's search mechanism. That is not inconceivable and it could be done. We'll probably all get to find out for sure in early 2008.
I have no inside knowledge of what the top brass at AOL nor the top brass at Time Warner is really thinking. It is quite possible that Bewkes will change directions from a slight divestiture into a break-up plan, but that is not how it seems today. As of today I am still predicting that AOL will become its own tracking stock with Time Warner selling something to the tune of 25% to 49% or some structure where the bulk of the ownership is independent but the votes are controlled in a separate class for a long-period.
AOL has had its issues and that isn't deniable. But for Time Warner to just sell it outright it would want cash and the thought of Google having a stake in a MSN or Yahoo! subsidiary is counter intuitive. So I am sticking with a partial spin-off expected. Undoing the full media ties with no strings attached may sound good to some analysts. But that can be a scary internal situation for business unit managers who would then have to strike partnerships with former competitors.
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Reader Comments (Page 1 of 1)
11-27-2007 @ 12:53PM
global said...
spin off, sell off.l. what;s the difference?
11-27-2007 @ 8:36PM
Marah Marie said...
That title is indeed badly worded. I think he's favoring the "spinoff" of some AOL properties as opposed to the sale of the AOL unit in it's entirety.