RSSGoogle sees erosion of its $1B AOL investment
By Jacqueline Emigh | Published August 8, 2008, 12:29 PM
Google has admitted to the SEC that its 2006 investment in AOL could be "impaired," meaning that its 5 percent stake in AOL might now be worth considerably less than the $1 billion the company paid in 2006.
For Google, this assessment might bring a substantial charge against future profits, although the highly profitable company -- which earned $2.55 billion during the first half of 2008 alone -- seems likely to be able to absorb the loss rather handily.
According to analysts, AOL is now worth only about $10 billion, or roughly half of its $20 billion valuation two years ago, just after Google had made its investment. Google bought the 5 percent stake mainly to keep AOL, one of its biggest advertising partners, from teaming up with Microsoft.
Google now has the legal right to demand that Time Warner either buy back its stake or spin off AOL through an IPO. So far, though, Google has given no indication of plans to pursue either of those courses of action.
Meanwhile, Time Warner has been giving off signs that it is readying AOL for a possible sale. Time Warner CEO Jeff Bewkes confirmed earlier this week that his company will split its Internet division into two companies, a dial-up unit and an advertising firm. He did stop short of saying that Time Warner will spin off or sell either of them.
Earthlink, though, has already voiced interest in acquiring AOL's dial-up arm. At the same time, Time Warner is rumored to talking with both Yahoo and Microsoft about a possible divestiture of its advertising business.
BWAAAAAAHAHHAHAHAAHHAHAAHAHAHAHAH!!!!!!!!!!!!!!!
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I'm with you MJM. As a former employee of AOL from the "good old days" (the mid 90's) it still makes me sad to see it continue to decline, but who didn't see it coming? There is still a TON of great talent at AOL, and hopefully once they spin off AOL from Time Warner we'll see a resurgence of creative energy and business savvy. Yes, I said once they spin it off, as far as I've been told it's not a matter of if, it's a matter of when. Even though companies like RackSpace had a tough IPO, I think it's prime time for more Tech Companies to take the plunge. As the economy sours, people spend less time out spending money, and more time viewing content online. Tech companies like AOL will see a resurgence as long as they're managed correctly by their executive team. Like I said, AOL still has a lot of incredible talent on their team, and I think they'll see a very positive push once spun off from Time Warner.
Steve Case, former CEO and founder of AOL, freely admits his biggest mistake ever made was acquiring Time Warner. Lets move past it and see both companies grow exponentially.
Warm Regards,
Scott Hardy
http://www.topclassactions.com
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Amen, Scott. Not too long ago AOL let go nearly all of its beta staff. Now there was a talent pool of individuals. You can probably count the beta staff on one hand now. Sometimes I think Time Warner wants AOL to fall on its sword. I sure hope they don't and can make a come back.
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"Google now has the legal right to demand that Time Warner either buy back its stake or spin off AOL through an IPO."
AOL's not been IPO'd?
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AOL is traded under TWX, but not as a separate business entity. In case AOL will be spun off, it will be possible to IPO and thus raise the capital to return/readjust Google's investment.
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Yeah nobody saw this coming?
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