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November 6, 2005

Microsoft front-runner in AOL talks

Posted by David Hunter at 10:02 PM ET.

Richard Siklos at the NY Times:

Microsoft has emerged as the front-runner in the talks surrounding the potential sale of a stake in America Online, two people involved in the negotiations said. But despite a flurry of interest in AOL from Microsoft, Google and others, finding a deal has been harder than Time Warner may have hoped.

Were Microsoft to prevail, it would do so with an investment and partnership that includes folding its MSN Internet service into a venture with AOL.

A chief sticking point in a potential Microsoft deal is how it would be governed, and thus far Time Warner has taken the position that, barring a very rich offer, it will not cede control.

Three people involved in the talks said Mr. Gates was singularly motivated by his determination to stem the rise of Google. Under a deal between AOL and Google that comes up for renewal each year, Google provides the Web search on AOL’s services, and manages the advertising related to it. This year, 11 percent of Google’s revenue came from advertising it placed on AOL sites.

Internally, senior executives at AOL and Time Warner have lamented that while they benefit from the Google link, they have no direct involvement in a business that is the fastest-growing sector of the advertising market.

More buzz by following the link including the Google counteroffer.

Filed under AOL, Acquisitions, Alliances, Coopetition, Google, MSN

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