09 February 2009

Ties between Google and AOL weaken

Search engine giant Google has told Time Warner that it wants to cash in on its stake in AOL. The move could lead towards the internet business being spun off or sold.

News agency Reuters reports that Time Warner said yesterday it had received a request from Google to exercise its "demand registration statement" on the search engine's AOL stake.

According to Brand Republic, John Martin, Chief Financial Officer of Time Warner said: "We're reviewing what we received and we're evaluating our options."

He noted that Google's decision leaves Time Warner with multiple options, including taking AOL public or buying the stake back. In addition, Time Warner CEP Jeffrey Bewkes said that the company was considering all options, including spinning off AOL to shareholders.

The share purchased by Google three years ago had declined in value. At the time, AOL was valued at $20bn and the stake at $1bn. However, AOL is now considered to be worth about a quarter of that, with a value of around $5.5bn.

Despite Google's choice to sell the stake, AOL will still retain ties with the Google search engine through part of a separate, long-term deal. Some analysts have speculated that AOL will turn to other search partners like Microsoft's MSN after the search deal with Google ends.

Others say that AOL could speed up a possible merger with Yahoo! or Microsoft - both companies that could be interested in AOL's media and advertising business.

Like many other companies, AOL has suffered from the current economic recession and a decline in ad sales, with their global ad revenue sliding 18 per cent in Q4 2008 from the year before. The company announced last month it would cut 700 jobs in a bit to cut costs.

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