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[Phoenix]

NEW YORK (CNN/Money) - Time Warner stock rallied Thursday on reports that it's holding talks with Microsoft regarding an alliance with or investment in America Online.

A source close to the situation told CNN that there have been discussions between the two companies on how to leverage the search and advertising components of the businesses. This person said it's conceivable there could be an investment down the road, but that there was no deal yet.

The New York Post, which first reported the story, said that under terms being discussed, Time Warner (up $0.59 to $18.51, Research) would be equal partners with Microsoft (down $0.01 to $26.30, Research) in a combination of AOL and Microsoft's MSN Internet unit. Microsoft would give Time Warner some cash in addition to contributing MSN to it, the report said.

Officials at Time Warner and Microsoft had no comment on the reports.

Wall Street analysts who follow Microsoft said the story in the Post was the first they had heard of the talks. They said that if a deal is struck, it could be reviewed by the Department of Justice.

Part of Microsoft's goal in the talks is to get AOL to switch to its search engine, according to a separate report in the Wall Street Journal. AOL currently uses Google's search technology, and gets 110 million site visitors a month, making it Google's single largest revenue source, according to the paper.

The Post reported that the companies are hopeful they can wrap a deal up within the next couple of months, but that Time Warner is also holding discussions with Internet search leaders Yahoo! (Research) and Google (Research) over a sale or venture with AOL in case the Microsoft negotiations fall apart.

Time Warner, the world's largest media company, was purchased by America Online, but the combined company's stock has performed badly since the January 2001 closing of the deal. CNN/Money is a unit of Time Warner.

The New York-based company is under pressure from a shareholder group led by financier Carl Icahn, who is pushing for the company to sell some units and repurchase more outstanding shares in an effort to raise stock price.

While AOL is profitable, reporting revenue of $8.6 billion and operating income of $1.1 billion in the 12 months ended June 30, it has continued to lose subscribers as customers leave its core dial-up service for high-speed Internet connections.

At the end of June, it had 20.8 million subscribers, down 2.6 million from a year earlier and down 5.7 million from three years ago. AOL is seeking to shift to a more advertising-based portal model, rather than one that depends upon subscription revenue.

Icahn has called for a sale of the company's cable unit, which Merrill Lynch estimates could fetch $40 billion, while it puts the value of AOL at only $8.8 billion.

But Mario Gabelli, whose Gabelli Asset Management owns more than 15 million shares of Time Warner, estimated at an investor conference earlier this month that if AOL's portal strategy is successful, the AOL unit could be worth $50 billion.

The pressure from Icahn increased Monday when he announced that his group, which holds a 2.6 percent stake in Time Warner, would seek seats on the company's board.

The Post also said in its report that Time Inc., Time Warner's magazine unit, could be sold in 2006 if its performance doesn't improve.

Source

 

[DarienA]

I saw this early this morning...

I laughed...

While both portals are much improved... both actual Inet services are a joke... still.

 

[Tamanon]

And lo, the two-headed monster did come from the ocean, and it feasted on suckers and fools.

 

[Maleficent]

And lo, the two-headed monster did come from the ocean, and it feasted on suckers and fools.

Yes but the world has more suckers and fools than wise.

therefore show'em the money.

 

[open_mouth_]

It'd be a good move for Microsoft, imo. They can leverage the huge combined userbase for insane advertising deals and better services to users (like a combining of AIM and Messenger users).

 

[ManDudeChild]

I'm a bit confused. Which one is the devil? :lol

 

[Nerevar]

they'd pretty much own the entire chat business. That would be interesting.




and by "interesting " I mean "terrible"

 

[DarienA]

I'm a bit confused. Which one is the devil? :lol

The devil can be in many places at once....

 

[dskillzhtown]

Time Warner is going to get to dump AOL?

So Microsoft running it's own ISP? Does AOL own Netscape still? That would mean that Microsoft would be providing the browser for the PSP, and probably the PS3.

 

[DarienA]

Time Warner is going to get to dump AOL?

So Microsoft running it's own ISP? Does AOL own Netscape still? That would mean that Microsoft would be providing the browser for the PSP, and probably the PS3.

How did you come to that conclusion?

If IIRC Netfront actually did the PSP browser.

BTW Microsoft has had it's own ISP, MSN for years.

 

[dskillzhtown]

How did you come to that conclusion?

If IIRC Netfront actually did the PSP browser.

BTW Microsoft has had it's own ISP, MSN for years.

When I logged on to a site with my PSP, it said it detected Netscape.

Well, I never thought of MSN having alot of subscribers. I thought it was kind of a fringe thing, whereas AOL is a monster in terms of subscribers.

 

[DarienA]

When I logged on to a site with my PSP, it said it detected Netscape.

Well, I never thought of MSN having alot of subscribers. I thought it was kind of a fringe thing, whereas AOL is a monster in terms of subscribers.

Yes the Netfront PDA browser will be detected as a Netscape 4 browser by various sites as well.

Trust me, it's a Netfront browser.

 

[dskillzhtown]

Yes the Netfront PDA browser will be detected as a Netscape 4 browser by various sites as well.

Trust me, it's a Netfront browser.

gotcha.

 

[Seth C]

Did you all not notice? This isn't about AOL. This is about GOOGLE. Microsoft hates Google, and they want AOL's subscriber base using MSN's search instead of Google's.

 

[Phoenix]

Did you all not notice? This isn't about AOL. This is about GOOGLE. Microsoft hates Google, and they want AOL's subscriber base using MSN's search instead of Google's.

Yep the goal is to drive a VERY significant amount of Googles revenue to MSN. An AOL/MSN joining is a good move for Time Warner because really TW just doesn't know what the hell to do with AOL whereas Microsoft will be able to put a solid online strategy together to exploit AOLs market base. Google is Microsoft biggest threat these days and they are willing to do things they wouldn't otherwise in order to do harm to them.

This could be disasterous for AOL and TimeWarner if they aren't careful as Microsoft has a vested interest in destroying AOL and heavily twisting TWX as well. Microsoft has clearly established over time that they are not to be trusted when it comes to ventures so I sincerely hope the people in TWX upper management are careful.

 

[The Abominable Snowman]

Un less Time Warner wants to have it's own pay services and whatnot on Microsoft's search engine, MS has way much more to gain from this than AOL, if an alliance is in the cards. It'd be a big driver for growth for MS especially, and I'm sure TW will be compensated somehow. This is a big hit to Google whose most major revenue source is from their AOL partnership, but I'm sure they're seeking counter-ventures and foresaw this coming a year or two ago when there were talks of MS buying AOL and whatnot.

If this is more of a merger thing, then hell has descended upon Earth, Microsoft = internet, and Google's days are numbered

Seriously, if AOL were merged into MSN, they'd be the single biggest internet infrastructure ever, nearly untouchable.