TELECOM Digest OnLine - Sorted: Microsoft in Talks on AOL Link

Microsoft in Talks on AOL Link

Kenneth Li (
Thu, 15 Sep 2005 12:31:24 -0500

By Kenneth Li

Time Warner Inc. and Microsoft Corp. are discussing cooperation
between their Internet search and advertising networks, a source
familiar with the matter said on Thursday.

"There have been talks on ways Microsoft and AOL assets can be better
leveraged and they've taken place over the normal course of business
...," the source said, calling reports of a joint venture "way

Although talks, which have taken place over several months, could
advance, nothing was imminent, the source added.

Time Warner shares rose 2.7 percent after the New York Post reported on
Thursday the two were talking about a joint venture.

Time Warner declined comment. Microsoft was not immediately reachable.

Discussions started some two years ago after the companies settled a
long-running antitrust suit that America Online, a unit of Time
Warner, filed against the software giant, the source said.

Time Warner has been under pressure to boost its stock price, which
has fallen 70 percent over the past five years. Corporate raider Carl
Icahn this week said he planned to seek one or more shareholder-
nominated board seats at the company to force changes.

Icahn has demanded that the company raise its stock buyback program to
$20 billion from Time Warner's existing commitments of up to $5
billion and completely spin off its cable division.

One investor was cheered by the discussions and said anything that
could add some $4 per share to the stock price from improvements at
AOL was a good sign.

"Management is not asleep at the switch," said Larry Haverty, a
portfolio manager at Gabelli Asset Management, which has a stake of
about $286 million in Time Warner.

"Anything you can do to move the needle in that direction is terrific
for shareholders."

Low ball estimates for AOL are about $10 billion with improvements
possibly doubling that valuation, Richard Greenfield, an analyst at
Fulcrum Global Partners said.

Time Warner shares were up 55 cents at $18.47 in late morning trading on
the New York Stock Exchange.

Copyright 2005 Reuters Limited.

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