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AOL, at one time a leading Internet service provider, is looking to spin-off its dial-up operations and merge the remainder of the company with Yahoo, according to a report by Reuters.
This isn’t the first time rumors of a deal between Yahoo and AOL have cropped up. Just a few months ago, a number of private equity firms considered teaming up with AOL to purchase the search provider. Once again, Yahoo has yet to be contacted for discussions about the deal.
That seems to be a common theme in all of these discussions. Talks about deals happen all the time, and most of them never see the light of day. But this is yet another in a long series of potential “deals” between AOL that haven’t involved the search giant. What, are they afraid Yahoo’s CEO Carol Bartz, with her penchant for swearing like a sailor, will chew the executives out beyond recognition?
Yahoo has been under pressure to improve its performance since Carol Bartz was appointed CEO in 2009. Bartz herself has come under criticism for mishandling relationships with important partners in Asia and allowing high turnover in Yahoo’s executive ranks.
AOL is also in the process of turning around its image to become a massive producer and provider of content, rather than Internet connectivity. The company has begun quickly offloading weaker assets like Bebo and picking up content providers like tech blogging site TechCrunch. The moves are part of new-CEO Tim Armstrong’s vision to make AOL the largest producer of content on the web after a number of failed attempts to diversify the company’s revenue.
AOL was spun off from Time Warner after one of the craziest mergers of all time last year. AOL co-founder Steve Case said it was a mismatch in company personalities that led to AOL’s slow decline while it was a part of Time Warner. AOL originally played the part of the young and disruptive startup but inevitably took up its parent company’s mentality of defending older revenue models, Case said.
AOL is currently valued at $2.7 billion and reported operating income of $166.6 million in its most recent quarterly filing with the Securities and Exchange Commission. (It took a $1 billion goodwill-impairment charge in the quarter.) AOL has $391.6 million in cash, according to the filing. Yahoo, on the other hand, is worth $20.6 billion, and reported net income of $143 million in its most recent quarter.
The deal is reportedly maddeningly complicated and involves a number of potential suitors for the dial-up segment of AOL’s business. So, as always, take this one with a grain of salt.
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