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Report: Microsoft Meeting with Time Warner Regarding AOL

Just two days after walking away from its $49.6 billion bid for Yahoo, the Times Online U.K. is reporting that Microsoft is meeting with Time Warner executives regarding a possible bid for America Online -- the very company Yahoo turned to in a possible attempt to stave off the takeover bid from Redmond.

According to the article published Monday, the talks started before the Yahoo-Microsoft negotiations fell apart -- possibly initiated back when "Microsoft was seeking to stymie discussions between Time Warner and Yahoo," as Times reporter Suzy Jagger wrote -- but, according to unnamed, sources have continued.

Yahoo's proposed deal with Time Warner values AOL at approximately $10 billion. But Time Warner may think Redmond can offer something sweeter: It was also reported this weekend that AOL approached Microsoft regarding acquiring the company.

Many analysts are speculating that another high-traffic Internet site like AOL, MySpace or Facebook will be the next target for Microsoft Chief Executive Officer Steve Ballmer. In fact, in his Saturday letter to Yahoo CEO Jerry Yang explaining why he walked away from the deal, Ballmer wrote, "We will move forward and will continue to innovate and grow our business at Microsoft with the talented team we have in place and potentially through strategic transactions with other business partners."

While some are encouraging Microsoft to pursue AOL, the aging Internet provider may not stand up as a Yahoo replacement; the company's ad revenue dropped 23 percent in the last year with flat ad sales, despite its Web traffic growing 15 percent. According to comScore, an Internet traffic tracking site, in March AOL ranked fourth in overall U.S. traffic with 111 million users monthly, compared to first-ranked Yahoo with 139 million.

Another possible barrier to any Microsoft-AOL deal is that Google owns a 5 percent stake in AOL. Yahoo's recent advertising deal with Google was one of the main factors Ballmer cited in his letter for walking away from Yahoo, writing in part that Yahoo's "apparent plan to pursue such an arrangement in the event of a proxy contest or exchange offer leads me to the firm decision not to pursue such a path."

Microsoft and Time Warner did not respond to the Times report.

About the Author

Becky Nagel is the executive editor of the 1105 Redmond Media Group's Web sites, including Redmondmag.com, RCPmag.com, RedDevNews.com and VisualStudioMagazine.com, among others.

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