12th September 2011
Kara Swisher, a commentator for All Things Digital, says her sources suggest that AOL has more than enough on its plate without reversing into the larger firm.
She writes: "It certainly is true that AOL boss Tim Armstrong has talked many times about a possible link-up of AOL and Yahoo in the past, even publicly. And, well before he was CEO, the pair of companies held very serious talks about combining. But no longer and definitely not currently in what approximates any serious effort. If wishes were horses, I suppose, all stumbling Web companies would ride away together into the sunset of success.
"But the real story is a lot tougher for Armstrong, who most definitely is increasingly in need of some kind of miracle, because – despite his best efforts and some progress at turning around the perennially troubled AOL – Wall Street is growing weary of waiting for his strategies to work."
That probably doesn't satisfy arguably the techworld's most outspoken commentator Henry Blodget on Business Insider. He says he has been trying to get the two firms to merge for years now though admittedly last week, he also suggested that Yahoo buy Business Insider which would set about sorting out the company and finding it a new chief executive.
Here is his – updated – argument. He writes: "Yahoo and AOL are both in the same business, and it is a business that benefits greatly from scale. Yahoo and AOL are both basically media companies. They both use technology extensively, but their core competency is producing content to attract an audience and then selling display ads against that audience. They also both operate duplicative mail, instant-messaging, sports, finance, news, maps, and other services, all of which currently compete with each other. That is senseless. By combining, Yahoo and AOL would achieve greater scale and reduce duplication."
Blodget says that AOL boss Tim Armstrong will need to make a lot of cuts but there will also be a lot of opportunities.
"Combining AOL and Yahoo would make the combined platform a "must buy" for any display advertiser. The display market isn't growing as fast as the search market, but it's still a huge and fast-growing market. Right now, the two companies' sales forces are duplicated. They needn't be. And the combination would offer advertisers even greater reach, inventory, and targetability. This, in turn, would reduce content production costs as a percentage of revenue."
Part of Swisher's argument is that AOL is still trying to work out what to do with the online titles it recently acquired including Tech Crunch. Being owned by AOL hasn't stopped Tech Crunch's Eric Shonfeld considering the hows and why of a deal.
He writes: "Private equity firms Silver Lake Partners and Blackstone Group are penciling out ways to combine AOL with Yahoo in some sort of reverse merger, with Tim Armstrong becoming CEO. The thinking is that Yahoo could sell it's 40 percent stake of Alibaba (which could be worth as much as $10 billion) back to Alibaba, and shed some other assets as well to shrink the company to a more manageable size. AOL would do a reverse merger into Yahoo, and the private equity firms would finance the whole thing with debt, possibly taking the newly merged company private."
Shonfeld is a sceptic too, suggesting the firms are sending a message straight to Yahoo's shareholders, but that the deals that really make financial sense are usually thrashed out in private by management not through mega-phone deal making.
Back on the Wall Street Journal's Deal Journal Shira Ovide is also scathing about whether "it makes sense to lash two drunks together and hope they can walk straight".
However the site is also concerned that both firms, despite being perennial merger candidates, think it is wise to have the same strategic adviser Allen & Co. He thinks one of them should get another adviser.
And in the absence of a recovery strategy for AOL and of any conceivable way for Yahoo to catch Google, maybe it's a case of never say never.
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