Despite shrinking subs, desire for netco's Web portal is high
NEW YORK — It wasn’t long ago that Wall Street was valuing AOL at zero and Time Warner was yanking those three offending letters from atop its corporate headquarters.
Now Comcast and Google are said to be talking with Time Warner about jointly acquiring a stake in AOL as the one-time ugly duckling Netco suddenly emerges as the giant media conglom’s most courted asset.
There’s been resurgence in the Internet space as online advertising jumps and content migrates to the web. Stocks like Yahoo! And Google have tripled and quadrupled. Heavy hitters are eyeing AOL, which has remained one of the medium’s most recognized names. Indeed, Microsoft has been negotiating with TW about investing in AOL as well.
The Comcast-Google discussions are reportedly focused on the Web portal, as opposed to the dial-up service, which has been bleeding subscribers for the past four years as broadband has rolled out.
The portal is a doorway to AOL’s content offerings, such as the hugely successful streaming of the Live8 concert over the summer.
Reports said the talks valued all of AOL at $20 billion, but any deal would be only a fraction of that, since the dial-up biz, while shrinking, still delivers most of the cash.
Search engine powerhouse Google said it couldn’t comment on rumors, but “Google and AOL have a healthy global partnership, and AOL remains a valued partner.”
Time Warner declined to comment.
A Comcast rep wasn’t immediately available.
Amid the Time Warner empire, AOL is “the most likely where something going on, where something will change,” one media fund manager said. “I think (chairman-CEO Richard) Parsons is considering all the options — selling pieces, selling it all or keeping it.” AOL generates annual cash flow of about $1 billion, a number that the company’s been able to maintain largely by aggressively cutting costs. The unit under Jon Miller has been rolling out new and improved versions of the service. Many Wall Streeters say the jury’s still out as to whether the company’s turnaround has been a success.
Still, from being a massive drag on Time Warner shares, it’s turned into a motor, as investors revisit the Internet’s allure. Parsons, under pressure from corporate raider Carl Icahn to sell off cable and buy back shares, has said publicly he believes a recovery of Time Warner’s stock has more to do with the performance of AOL than with almost any other factor at the company — whose assets include Warner Bros., Time Inc. and Turner Broadcasting.