Time Warner, Inc. (NYSE: TWX) is hearing a margin call of sorts from Google, Inc. (NASDAQ: GOOG). Google, which bought a 5% stake in AOL years ago for a cool billion, would like AOL's parent company to buy back this stake. Currently, Google's estimated stake is valued at under $300 million. In other words, Google will be the loser in this deal.The $1 billion investment in 2005 gave Google the right to ask AOL to either go public or buy back Google's stake, which is the option the search giant now wants to exercise. This is perfectly normal behavior by Google and doesn't represent a loss of faith in AOL, in this writer's opinion. Google is simply exercising its right based on the 5% stake taken out. Shoring up money in this environment is probably a grand idea, even though Google does have billions and billions on hand. Google has already written down $726 million of its investment in AOL as of January.
Google says that the timing remains right for this move, even as it continues to consider AOL a very valued partner in reach and advertising. Could Google be using this move as a ploy for a more favorable advertising partnership agreement with the Time Warner unit? Since its deal with Yahoo, Inc. (NASDAQ: YHOO) was plagued by antitrust issues and was shelved, this certainly seems possible. Google's money spread by AOL over the last three years did keep AOL's search business out of the hands of rivals. So in retrospect, it is a fair bet that Google made okay, even though technically it lost hundreds of millions on its AOL stake.
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Reader Comments (Page 1 of 1)
2-05-2009 @ 4:42PM
JDaggitt said...
Google putting their stock back to AOL is another in a long list of failures that must be placed at the feet of RonCo (ie, Ron Grant and Randy Falco) as the senior managers at AOL.
And please don't tell me this was done so Google could generate cash. If the investment was working, do you think they would have cashed out now?
But Google's action should be expected after the disastrous quarter; the turmoil throughout AOL; the abomination of the acquisition of Bebo by those two bozos (RonCo) and the inability to make progress on any front.
It is beyond me why Bewkes at TWX has not relieved them of their heads and jobs. Bewkes seems to value loyalty over competence or accomplishments.
2-06-2009 @ 4:26PM
GuiasLocal said...
TWX is an awesome company. Like many other companies they have to deal with techno adversity. The Bebo buy was a great buy to enrich the AOL search experience for new technology. In regards to Google wanting money back, it wont hurt Time Warner AOL, it will be a mosquito bite. Lucky for time Warner, Bill Gates is helping with Mosquito bites with his foundation which is fighting Malaria. In all seriousness AOl in the long run will hedge somehow. AOL has many ideas in their think tank. Dont you remember You've got mail. They will come back especially with Time Warner feed in demand world wide.