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July 16, 2008

Yahoo and Microsoft to fight over AOL acquisition?

Posted by David Hunter at 2:45 PM ET.

AOL logo As if all the squabbling over a Yahoo acquisition weren’t enough, today there were rumors that both Microsoft and Yahoo were in urgent talks to acquire AOL from Time Warner:

Time Warner Inc’s (NYSE:TWX) discussions to merge or sell its AOL Internet division with Microsoft Corp (NasdaqGS:MSFT) or Yahoo Inc. NasdaqGS:YHOO) have taken on new urgency ahead of Yahoo’s Aug 1 shareholders meeting, a source familiar with the discussions told Reuters on Tuesday.

The structure of any deal is not immediately clear, though a combination of any of the parties is expected to redraw the landscape for advertising on the Internet.

Sources had said earlier that a deal with Yahoo would likely involve merging AOL with the Web pioneer, with Time Warner taking a minority stake in the combined company. A deal with Microsoft would likely be a sale of AOL, the sources said.

Time Warner and Microsoft declined comment. A representatives of Yahoo was not immediately available.

An AOL purchase would represent traffic acquisition and added display advertising strength for either party which would presumably help keep Carl Icahn off Yahoo’s back or further Steve Ballmer’s “big bet” on the consumer side of the Web. The last time the Yahoo part of this particular rumor cropped up, I observed that

You may recall that Google owns 5% of AOL and handles their search ad business so Yahoo acquiring AOL and running Google ads would create a surprisingly homogeneous “content” and search company although not obviously a wildly profitable one.

and nothing has changed since then except the amazing possibility of a bidding war.

Filed under AOL, Acquisitions, Coopetition, Google, Yahoo

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