November 08, 2010, 12:18 PM — It appears AOL has taken the next step in pursuing strategic options (i.e., trying to stay alive) that include a possible merger with Yahoo.
From Monday's Wall Street Journal:
AOL Inc. has hired financial advisers to explore various strategic options for the company, one of which includes a possible tie-up with bigger rival Yahoo Inc., people familiar with the matter said.
In recent days, AOL's advisers have been presenting different scenarios to AOL officials that illustrate how the two companies could combine their operations and whether the complexity of any such transaction could be surmounted, the people said.
The real complexity in this case would be figuring out how two companies going nowhere can combine forces to become one company going somewhere. Which could happen if...well, if online search giant Google were to announce it had proven its point and would now shut its doors and retire from the Internet. Otherwise, probably not.
Interestingly, the WSJ article made no mention of AOL buying Yahoo with the help of private equity firms, which was last month's rumor. Instead, the article is peppered with references to a "merger" or "partnering."
However, W. David Gardner at InformationWeek suggests that's still on the table:
[O]ne scenario said to be under examination would have AOL acquire Yahoo in a so-called "minnow swallowing a whale" equity maneuver.
The challenge there is that AOL's market capitalization of $2.7 billion is dwarfed by Yahoo's market cap of $22.1 billion. A commenter in the WSJ puts this particular option in context:
AOL is fantasizing. Maybe instead they should buy Microsoft, which also has a nice portfolio of products, patents, and name recognition. In fact, why not go for the gold and buy Google?
And then Apple!
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.