In a bid to fend off Microsoft's takeover bid, search engine provider Yahoo! is closing in on a deal with AOL, according to sources.Confirming a Wall Street Journal story, one insider told Reuters that under the terms of such a deal, Yahoo! would receive a cash investment from AOL's parent company Time Warner in exchange for a 20 per cent stake in the combined business.
The agreement, which would exclude AOL's dial-up internet access business, would reportedly value AOL at around $10 billion.
According to the source, Yahoo! would use the money provided by AOL to buy back millions of its own shares to boost its holdings and raise its stock prices.
Meanwhile, Greg Sterling, an analyst at Sterling Market Intelligence, stated that, were AOL and Yahoo! to combine, they may choose to make their instant messaging programs interoperable, USA Today reports.
He went on to say that both Yahoo! and AOL's strengths are in display advertising, adding: "Together, ad reps would have an easier time selling a large audience. It would give both a big boost."
Reportedly, the move to avoid a Microsoft takeover is part of a two-pronged strategy which would also see Yahoo! team up with Google to outsource some of its web search ad operations.
Under the deal, which was announced last week, Yahoo! will initiate a limited test of Google's AdSense for Search service.
