With Google out of Yahoo’s sights, will AOL be next in line?
By Justin Montgomery
Yahoo messed up badly in the handling of offers from both Microsoft and Google. With stock prices dipping below the $14 mark, the fledgling search company is searching out any offer possible. Will AOL make it into the mix?
Wired News is reporting that the disintegration of the Google-Yahoo partnership should effectively eliminate Yahoo’s chances to buy AOL and make it a tantalizing target for Microsoft yet again. Though that may be true at the moment, I wouldn’t put AOL out of the mix just yet. Facing a Justice Department review, Google effectively walked from the deal recently leaving Yahoo scrambling for any trace of hope. After walking away from a lucrative buyout offer from Microsoft, AOL may be the last hope in regaining a last chance offer. “It’s very hard to see how a Yahoo/AOL deal could happen,” Bernstein Research analyst Jeffrey Lindsay. “That would mean that Yahoo is in a very attractive proposition for Microsoft.”
The Google deal, most likely, would have brought Yahoo out of the trenches, at least for the time being. It was estimated that Yahoo could have profited nearly $250 million over the next year serving Google advertising to key words that are currently making little to no money for Yahoo. Since that option has finally been relieved, Yahoo would have to rely on an all-stock buyout of AOL to make itself more attractive for Microsoft once again. The only problem is that Yahoo’s share price isn’t high enough to reach the $8 billion asking price that Time Warner is thought to want. At best, Yahoo might be able to swing $4 billion, but it doesn’t make sense for Time Warner to sell at such a discount when AOL continues to bring in money for the company.
Microsoft has said many times that it isn’t interested in Yahoo anymore, even with its now heavily discounted price. The only good news is that Microsoft has been dying to get its hands on a company that can revive its online ad business, and if Yahoo keeps diminishing in value, it would only make sense for Microsoft to jump at the opportunity. “If anything, Microsoft’s desire for Yahoo has actually gotten greater” since May, says Lindsay. “The part Microsoft really wants is Yahoo’s search business, and that’s holding up really well. Now Microsoft won’t have to pay a huge premium for what it didn’t really want.”
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