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Report: AOL Leaning Toward Partnership With Microsoft

Dec 6, 2005  •  Post A Comment

Time Warner’s America Online unit may be just weeks away from announcing an advertising and Web search alliance with software giant Microsoft, though the deal could end up being far less reaching than Wall Street had expected.

According to an article in Tuesday’s Wall Street Journal, AOL appears to be leaning toward partnering with Microsoft, but the article states the deal might involve little, if any, cash for a stake in AOL.

Microsoft is one of several suitors to have expressed interest in AOL this fall. Others include Google, Comcast and at one point Yahoo. Yahoo dropped out a few weeks ago after it failed to reach an accord with Time Warner over the terms of an agreement. Comcast is seen as a potential partner with Google.

According to the Journal, the AOL-Microsoft deal would be announced in two weeks and would involve tapping Microsoft’s MSN service for AOL’s search function and forming a joint sales team to tackle online advertising for both AOL and MSN. AOL currently has a deal with Google for search, under which Google and AOL share in the revenue generated by the search function. That deal generated $300 million last year for Google. The alliance runs through 2006.

Initial market chatter had companies such as Microsoft and Google buying a stake in AOL. However, Time Warner’s ongoing fight with financier Carl Icahn appears to have thrown cold water on such a plan. With Mr. Icahn gearing up for a proxy fight in an effort to replace several members of Time Warner’s board, Time Warner executives appear loath to strike any deal in which a dollar value could be assigned to AOL, the article said.