Yahoo or MSN to buy AOL?

May 7, 2004

Wall Street sources said Parsons has been sending a message to prospective buyers from the investment world, who are itching to snap up AOL on the cheap.

Much of the interest is coming from private equity firms, like Blackstone Group, KKR, and Thomas H. Lee - who have lots of cash to spend.

The rumor of a possible AOL sale to Yahoo or Microsoft is floating around again, after AOL posted a successful 1st Quarter, mostly based on advertising sales. The New York Daily News said Time Warner CEO Richard Parsons is expected to listen to bids from other online competitors such as Yahoo and MSN:

Parsons is said to be seeking $20 billion for AOL - more than double what he’s being offered by financial buyers.

“He’s being approached,” a source said. “He has no plans to do anything right now.”

But while financial buyers are being spurned, sources said they expect Parsons to listen to strategic buyers, such as Microsoft or Yahoo, who could merge their operations with AOL and slash costs.

However, it is also reported that the Time Warner chief is not entertaining bids, only considering them. “Indeed, with positive results being seen in both advertising sales and growth in AOL’s broadband service subscriptions, Parsons is said to be ‘brushing off suitors.’ And if a deal were to be done, a source told the News, Time Warner would ‘retain a significant stake’ in AOL.”

Time Warner’s America Online turned in a better than expected performance in the first quarter of 2003 with a little help from paid search and broadband. According to reports from analysts, paid search brought in revenues of $27 million in Q1 from an AOL partnership with Google. Google powers the AOL search engine along with AOL search engine advertising - which is actually Google AdWords.

AOL reported total operating income of US$277 million, compared to $194 million in the year-ago period on revenue that remained essentially flat at $2.2 billion.

Operating income before depreciation and amortization rose 21 percent, from $404 million in the first quarter of 2003 to $489 million in the most recent quarter.

Source: Search Engine Journal

        

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