Posted February 4, 2009 4:52 pm by with 3 comments

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During Time Warner’s earnings call today, CEO Jeff Bewkes told a sad tale of love gone wrong. Yes, Google is “dear johning” AOL. I hear the letter went something like this:

Dear Time Warner: Cut AOL loose or count us out. Love, Google.

Now, this is kind of a big deal, since Google does own a 5% share of the erstwhile giant of ISPs. Google bought that share with $1B back in December 2005, beating out Microsoft in a bidding war that brought AOL’s valuation to the needed $20B—and it looked like a major blow to Microsoft. (Though you can probably guess who might be laughing now.)

The three-year deal “matured” last year, with July 1 as the first day Google could opt out of AOL. Instead of opting out, they wrote down $726M of their investment in AOL in Q4 2008.

But this week, the tune sounds a little different. With the nearly 75% write-down, Google apparently places AOL’s total value at about $5.4B. With the clauses from their original agreement, Google is now holding Time Warner between a rock and a hard place, forcing them to either buy themselves out of their deal or spin AOL off into its own public company. Less likely, a larger deal could also free Time Warner from this obligation.

But would going public really be any better for AOL than being part of Time Warner? With 5% of the company in its portfolio, perhaps Google could hold a controlling interest. Or perhaps Google is hoping to acquire more of the company at market value these days. Or maybe they’re simply hoping to unload their shares on the general market.

What do you think? Why does Google want AOL public—or are they hoping Time Warner will balk, and pay them out of the contract?


  • There is no doubt that Google is evil. We cant really say the founder Larry Page is responsible since Google is a huge corporation of many people in there, so not exactly Google gone bad.

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  • With Time Warner announcing that they are cutting jobs, and AOL also having some recent cuts… Is Google trying to force them into doing what will serve them better?

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  • Google is definitely up to something here. What do the financial gurus say? They will surely be best equipped to give us the low down on what exactly the intent here could be? Google has been tightening up ship, and they are obviously trying to walk away from this one with minimum harm done.