Aol and Yahoo said to be in merger talks

Aol and Yahoo have had their most embarrassing moments this week under the media spotlight. So it’s only natural that the two companies are rumored to be talking about a merger.

Bloomberg reported Aol chief executive Officer Tim Armstrong is talking with advisers to Yahoo about merging the companies after the firing of CEO Carol Bartz. The story cited two unnamed sources.

Both companies are in need of help; we could crack jokes about about how “two wrongs don’t make a right.” Armstrong had egg on his face this week after a feud over Michael Arrington’s potential conflicts of interest related to covering companies for TechCrunch while possibly investing in them the Aol-backed CrunchFund venture fund at the same time. Arrington wound up getting fired after Arianna Huffington, who runs Aol’s news-publishing division, apparently overruled Armstrong’s decision to allow Arrington to invest and write at the same time.

Reportedly, Armstrong is talking to representatives of Allen & Co., which is working with Yahoo. In one hypothetical scenario, Yahoo could acquire Aol and Armstrong could become the CEO of the combined company. Aol’s market value is about $1.6 billion, while Yahoo’s is $18.2 billion. The companies declined to comment to Bloomberg.

Kara Swisher of AllThingsD said that her sources told her that there are no serious talks between Aol and Yahoo. But she did say that Armstrong is in an increasingly tenuous position as investors await a better outcome on the half-dozen acquisitions that Aol has made to prove that it’s not an internet has-been. Aol’s stock is down 39 percent since late 2009.