Thursday, October 13, 2005


Smart play by Google to bring Comcast into the picture. Or was it Comcast that initiated? Either way, Google really needed to cut into the Microsoft and AOL talks because it would have killed a chunk of their revenues. More from The Wall Street Journal:

Google Inc. and Comcast Corp. are in serious discussions with Time Warner Inc. about buying a minority stake in America Online for as much as $5 billion, according to people familiar with the situation.

The negotiations focus primarily on AOL's network of Web sites, such as the Web portal and AOL Instant Messenger, rather than its slowly declining telephone dial-up Internet business. AOL is the Internet's second-biggest network of sites, with 112 million U.S. visitors in September, trailing Yahoo Inc.'s 123 million, according to comScore Media Metrix.

Google and Comcast are hoping a stake in AOL will allow them to tap AOL's large audience and its content offerings, such as concerts, drawing more consumers and advertising to their Internet services.

The talks threaten to derail separate negotiations under way between Microsoft Corp. and AOL about creating an Internet joint venture. Those discussions, which have been percolating for several months, were progressing rapidly until talks with Google and Comcast heated up last week, according to people close to the deal.

The structure of the deal is up in the air. Under one of the ideas being discussed, Google, of Mountain View, Calif., and Philadelphia-based Comcast would join together in a partnership that would own about 50% of AOL, the people said. However, Time Warner, of New York, wants a controlling interest in AOL that it can consolidate on its income statement.

Dividing AOL into an Internet-access business and a content business wouldn't be trivial, since they are currently intertwined. However, a person close to the discussions says the spun-off portion of AOL could license its content to the portion of AOL that provides Internet-access accounts. Google and Comcast are valuing AOL's content business at about $10 billion, which implies a valuation of as much as $5 billion for a minority stake.
(full article)

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