Yet another rumor about AOL merging with Yahoo

Reuters reports AOL considering splitting up dial-up Internet business, display advertising

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Online content farm AOL reportedly is working on a super, double-secret plan to break up the company, with one potential result being a merger of one of its pieces with Yahoo, according to Reuters.

This is merely the latest rumor regarding the fate of AOL and its intentions to unite, one way or another, with the revenue growth-challenged Yahoo.

(Also see: AOL's takeover of Yahoo: Rumor or real? and How AOL is like the Chum Bucket)

From Reuters:

AOL Inc is actively exploring a breakup of the company in a complicated series of transactions that may lead to a merger with Yahoo Inc., sources close to the plans told Reuters.

AOL has not yet made a formal proposal to Yahoo, these people say.

Interesting, because the first time this rumor came up, in mid-October, we were told the discussions "don't yet involve Yahoo." Seriously, does Carol Bartz have to learn everything from Reuters and Google News?

Shares of AOL (NYSE: AOL) were up as high as 54 cents, or 2.1 percent, to 25.72 early Monday before falling back to 25.39 by mid-day.

The sources Reuters spoke to reportedly said AOL's two main businesses -- its original dial-up Internet service and its display advertising unit -- could be worth more separately. The problem is that both divisions are seeing a steep decline in revenue. And the dial-up division continues to bleed customers. Sure, it now as 4 million dial-up users (and falling), but selling a business entity with no real future growth prospects is no small challenge.

Further, the dial-up division contributes to the display advertising (content) business by feeding it customers eager to read all about the Clinton impeachment hearings. That goes away if the units are split up, presumably reducing the value of the content side.

Ever since it was kicked to the curb by Time Warner in December 2009, AOL has faced thorny questions about its future. A year later, it doesn't seem to be any closer to finding answers to them. And until AOL executives and investors actually begin talking to potential acquirers or merger candidates, instead of themselves, it's not likely to.

Chris Nerney writes about the business side of technology market strategies and trends, legal issues, leadership changes, mergers, venture capital, IPOs and technology stocks. Follow him on Twitter @ChrisNerney.

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