Yahoo! has pulled out of the competition to buy America Online from its parent Time Warner, narrowing the field of contenders to Microsoft and Google.
After we learned what their proposed deal terms were, we passed and we have never looked back, a Yahoo spokeswoman is quoted as saying when confirming a report in the Wall Street Journal. She said Yahoo had not made an offer for AOL but said Yahoo CEO Terry Semel had met with Time Warner chairman Richard Parsons in October.
A key stumbling block between Yahoo! and Time is thought to have been the media giant’s insistence on retaining a controlling stake in AOL.
The Journal, citing a person familiar with the matter, said Time Warner was not interested in the terms Yahoo was willing to offer but is still in talks with Google and Microsoft, with one of which Time Warner is expected to start exclusive negotiations in the coming days.
A deal with Google would give it a way to build a portal while preserving its existing relationship. Google makes more than 10 per cent of its revenues from allowing AOL to use its search technology. The companies share advertising revenues.
Microsoft is keen to strike its own deal with AOL because it wants to break Google’s dominance on the internet and would like AOL to move to using its MSN search technology.
AOL is being changed from an old-fashioned service for accessing the internet into a portal where customers can click on to news and entertainment. Advertisers are flocking to internet portals because they are attracting growing numbers of viewers.
The Journal also reported that Google is willing to buy a minority stake of the AOL unit, including its shrinking dial-up Internet access business. In one scenario, cable company Comcast Corp. would join Google in late negotiations for the unit.
Apparently, an AOL combination with Microsoft is now more likely to be a smaller-scale partnership, whereas Google is willing to buy a minority stake in AOL.
Yahoo, Google, Microsoft and Time Warner were not immediately available for comment.