How AOL gains from Microsoft-Yahoo
Microsoft’s (MSFT) bid for Yahoo (YHOO) is a rare bit of good news for Yahoo shareholders, but they’re not the only potential beneficiaries. One line of thought says the $44.6 billion proposal could help investors in Time Warner (TWX), publisher of Fortune, by giving the company a chance to sell its AOL unit.
The prospect of Microsoft joining up with Yahoo could spur the leading Internet advertising player, Google (GOOG), to take a “counterbalancing defensive measure” such as buying AOL, says Chris Atayan, CEO at consumer products wholesaler Amcon Distributing (DIT) of Omaha, Neb., and a former investment banker. He notes that Google took a 5% AOL stake back in 2005 and says a purchase of the rest could help Google maintain its leadership cushion over a combined Microsoft-Yahoo.
Not everyone buys the notion that AOL’s fortunes have turned brighter as a result of the deal. But Atayan, who owns Time Warner stock, says the 46% rise in Yahoo shares Friday gives Time Warner chief Jeffrey Bewkes “a great chance to say here’s the valuation” that could apply to AOL. He believes Time Warner has done a good job cleaning up the AOL business since its swoon during the tech bust but adds, “AOL has never been worth more in recent years than it is now.”
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Excellent analysis of the situation