ducks
12-17-2005, 09:42 AM
Google Nears AOL Deal
LAST UPDATE: 12/16/2005 5:30:01 PM
Click here for market insight from TheStreet.com
By TSC Staff, The Street.com
Time Warner entered talks with Google over a partnership with America Online, The Wall Street Journal reported.
Citing people close to the situation, the paper said Time Warner and Google "entered exclusive negotiations about deepening their advertising partnership, shutting out Microsoft." The Journal said Google will pay $1 billion for a 5% stake in AOL. The paper said any deal "won't likely be finalized until next week after Time Warner's board meeting on Wednesday."
A person familiar with the situation said talks between Microsoft and Time Warner had ended. Time Warner declined to comment, as did Google. Microsoft reps weren't immediately reachable.
Assuming that incumbent Google does win the AOL partnership race, "It's an incremental positive for Google and an incremental negative for Microsoft," says Mike Binger, who helps manage $2.5 billion at Thrivent Financial, including shares of Google, Time Warner and Microsoft. "Microsoft's future rests on their new operating system that comes out next year, not whether they were getting the Time Warner search business. It was Google's to lose."
Indeed, Google was in some minds the front-runner all along because it has a search advertising partnership with AOL already, though that deal expires next year. Google chief Eric Schmidt has been quoted saying he wants to continue to work with the Time Warner unit. On Friday, Google rose $5.27 to $427.80, Time Warner rose 21 cents to $18.05 and Microsoft fell 2 cents to $26.90.
"You had two different reasons for Google and Microsoft going after the company," says Peter Jankovskis at Oakbrook Investments, which owns shares of Time Warner and Microsoft, among its $1 billion in assets under management. "Microsoft was looking at it for picking up subscribers for MSN. Google was looking at securing a relationship with one of their larger customers."
This summer, news emerged that several companies -- notably Google, Microsoft and Yahoo! -- were bidding to take a stake in AOL. The development surprised some observers because AOL had long been dismissed on Wall Street for its shrinking if lucrative dial-up Internet access business. But investors increasingly came to the conclusion that hard-hitting Silicon Valley types valued AOL more for its content and its position with advertisers, delivered via a network of online Internet Web sites.
Developments in the AOL sweepstakes have been hard to figure out at times. For instance, Fiday's news comes just 10 days after the Journal reported that Time Warner was near an agreement with Microsoft to develop an online-advertising service to compete with Google. The Journal noted Friday that Microsoft "has been wooing AOL since January."
Earlier this month, it was reported that Time Warner had turned the focus of talks to a joint venture in which cash wouldn't change hands from the previously discussed minority stake sale. Previously, Yahoo! dropped out of the running amid conflicting reports about whether it had made a bid or had walked away at the sight of a gaudy price tag.
As it ponders the future of AOL, New York-based Time Warner faces a proxy fight with billionaire investor Carl Icahn, whose group holds 2.5% of Time Warner's shares. Icahn has criticized management for not doing enough to boost the share price. He has demanded a full spinoff of Time Warner's cable assets and a $20 billion stock buyback. Time Warner recently agreed to meet him halfway on the buyback, raising its repurchase target to $12.5 billion from $5 billion, but the company hasn't changed its limited spinoff plans.
Larry Haverty of Gabelli, a large shareholder of Time Warner, adds that any ad partnership, however nice, fails to answer big questions for the New York media giant. "The two keys for Time Warner shares are one, unlocking value of AOL, and two, is Wall Street ever going to value cable they way they have historically?" Haverty says. Cable valuations have been falling thanks to concerns regarding competition and technology.
Friday afternoon, Icahn had his say. Not altogether surprisingly, he criticized the discussions. He called the AOL talks "a bit of a travesty," Dow Jones reported.
"It is our understanding that several bidders have not been allowed to negotiate because they wanted control of AOL," Icahn told Dow Jones Newswires in an interview. "After three years of literally doing nothing, Time Warner management should give shareholders the right to decide if AOL should be sold."
"It is my belief that, if the proper partner were allowed to have control of AOL, shareholder value would be much more greatly enhanced than through a half-hearted joint venture that might only serve the purpose of entrenching management," Icahn said.
LAST UPDATE: 12/16/2005 5:30:01 PM
Click here for market insight from TheStreet.com
By TSC Staff, The Street.com
Time Warner entered talks with Google over a partnership with America Online, The Wall Street Journal reported.
Citing people close to the situation, the paper said Time Warner and Google "entered exclusive negotiations about deepening their advertising partnership, shutting out Microsoft." The Journal said Google will pay $1 billion for a 5% stake in AOL. The paper said any deal "won't likely be finalized until next week after Time Warner's board meeting on Wednesday."
A person familiar with the situation said talks between Microsoft and Time Warner had ended. Time Warner declined to comment, as did Google. Microsoft reps weren't immediately reachable.
Assuming that incumbent Google does win the AOL partnership race, "It's an incremental positive for Google and an incremental negative for Microsoft," says Mike Binger, who helps manage $2.5 billion at Thrivent Financial, including shares of Google, Time Warner and Microsoft. "Microsoft's future rests on their new operating system that comes out next year, not whether they were getting the Time Warner search business. It was Google's to lose."
Indeed, Google was in some minds the front-runner all along because it has a search advertising partnership with AOL already, though that deal expires next year. Google chief Eric Schmidt has been quoted saying he wants to continue to work with the Time Warner unit. On Friday, Google rose $5.27 to $427.80, Time Warner rose 21 cents to $18.05 and Microsoft fell 2 cents to $26.90.
"You had two different reasons for Google and Microsoft going after the company," says Peter Jankovskis at Oakbrook Investments, which owns shares of Time Warner and Microsoft, among its $1 billion in assets under management. "Microsoft was looking at it for picking up subscribers for MSN. Google was looking at securing a relationship with one of their larger customers."
This summer, news emerged that several companies -- notably Google, Microsoft and Yahoo! -- were bidding to take a stake in AOL. The development surprised some observers because AOL had long been dismissed on Wall Street for its shrinking if lucrative dial-up Internet access business. But investors increasingly came to the conclusion that hard-hitting Silicon Valley types valued AOL more for its content and its position with advertisers, delivered via a network of online Internet Web sites.
Developments in the AOL sweepstakes have been hard to figure out at times. For instance, Fiday's news comes just 10 days after the Journal reported that Time Warner was near an agreement with Microsoft to develop an online-advertising service to compete with Google. The Journal noted Friday that Microsoft "has been wooing AOL since January."
Earlier this month, it was reported that Time Warner had turned the focus of talks to a joint venture in which cash wouldn't change hands from the previously discussed minority stake sale. Previously, Yahoo! dropped out of the running amid conflicting reports about whether it had made a bid or had walked away at the sight of a gaudy price tag.
As it ponders the future of AOL, New York-based Time Warner faces a proxy fight with billionaire investor Carl Icahn, whose group holds 2.5% of Time Warner's shares. Icahn has criticized management for not doing enough to boost the share price. He has demanded a full spinoff of Time Warner's cable assets and a $20 billion stock buyback. Time Warner recently agreed to meet him halfway on the buyback, raising its repurchase target to $12.5 billion from $5 billion, but the company hasn't changed its limited spinoff plans.
Larry Haverty of Gabelli, a large shareholder of Time Warner, adds that any ad partnership, however nice, fails to answer big questions for the New York media giant. "The two keys for Time Warner shares are one, unlocking value of AOL, and two, is Wall Street ever going to value cable they way they have historically?" Haverty says. Cable valuations have been falling thanks to concerns regarding competition and technology.
Friday afternoon, Icahn had his say. Not altogether surprisingly, he criticized the discussions. He called the AOL talks "a bit of a travesty," Dow Jones reported.
"It is our understanding that several bidders have not been allowed to negotiate because they wanted control of AOL," Icahn told Dow Jones Newswires in an interview. "After three years of literally doing nothing, Time Warner management should give shareholders the right to decide if AOL should be sold."
"It is my belief that, if the proper partner were allowed to have control of AOL, shareholder value would be much more greatly enhanced than through a half-hearted joint venture that might only serve the purpose of entrenching management," Icahn said.