Comcast, Google Said to be in talks with Time Warner about Acquiring Stakes in AOL Portal
Web search engine Google and cable Company Comcast were in discussions to buy a stake in Time Warner’s America Online AOL, two sources said, in a deal reportedly worth as much as $5bn.
An investment would set the stage for an alliance marrying Time Warner’s trove of programming and Google’s popular search and e-mail services with Comcast’s high-speed internet portal and cable video distribution and telecommunications.
Under the deal, the three companies would form a new entity through which they would jointly own the Web portal, according to the person, who requested anonymity because release of the information was not authorized. AOL has been successful of late at generating online content, but America Online’s business prospects have suffered as more people switch from dial-up Internet access to high-speed connections.
It would also create a powerful new challenge to internet media company Yahoo! and software giant Microsoft.
Google also has held discussions with Comcast on its high-speed website strategy. Comcast aims to tap into the online advertising business as well as experiment in how it can translate its expertise in video distribution to the internet.
Google and Comcast will have to move quickly as Microsoft continues its own overture to AOL. Comcast and Google have not yet drafted a formal plan to invest in AOL, the sources said. One source said the deal, albeit attractive to Comcast, was not critical to the company.
Google and Comcast were valuing AOL’s content business at about $10bn, which implies a valuation of as much as $5bn for the minority stake, the Wall Street Journal said. However, one source close to the deal said Google and Comcast could make an investment in the entire AOL business, which would lift the deal value to more than $5bn.
Google and Comcast faced competition from Microsoft, which was also holding talks with AOL, one source said. In addition, Google had contacted Comcast last week over possible interest in executing a joint investment, one source said.
Google — which derived about 11% of its first-half revenues from a deal with AOL — has discussed with AOL interest in its free web-based services, such as instant messaging and programming.
Time Warner, which has recently faced criticism over its strategy from billionaire investor Carl Icahn, sees AOL as a centre-piece of future growth. The talks between AOL, Google and Comcast progressed over the US summer, but one source warned that the discussions were still in their early stages and could fall apart.
Time Warner and Comcast declined comment. A Google spokesman also declined comment, saying only: Google and AOL have a healthy global partnership and AOL remains a valued partner. Your inquiry is about rumored conversations and we are not able to respond to questions of this type.
An AOL spokeswoman declined to comment. AOL was the fifth-most-popular Web brand in September, according to Nielsen/NetRatings, while Google came in fourth.
Separately, myriad companies have contacted Time Warner over potential partnerships, including Yahoo Inc., but the Yahoo discussions have not progressed, one source said. Yahoo was not immediately available for comment.