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Internet search giant to pay $1 billion for 5 percent stake in AOL; Microsoft shut out of deal.
NEW YORK (Reuters) – Google Inc. and America Online Inc. Tuesday expanded their search and advertising alliance to include video and instant messaging, shutting out Microsoft Corp., which had fought hard for a deal with Time Warner Inc.’s AOL unit.America Online said Google had agreed to invest $1 billion to take a 5 percent stake in AOL, as part of an enhanced pact where Google will move beyond text-based advertising to allow AOL to sell graphical ads to Google’s fast-growing ad network.
The stake effectively values AOL at $20 billion, a key benchmark should Time Warner elect to spinoff or sell a part of its Internet unit in response to dissident shareholder Carl Icahn’s proxy campaign to break up the company.
Terms of the deal call for AOL to make more of its Web sites searchable via Google search, including a plans to feature AOL’s premium video services within Google Video, a way of searching for Web-based video programming.
They also said they had agreed, under certain unspecified conditions, to allow users of Google’s recently introduced instant messaging system Google Talk to communicate with users of AOL’s market-leading AIM instant messaging service.
Ahead of the announcement, analysts called the new agreement a major defensive win for Web search leader Google, depriving Microsoft (Research) of a major customer that would have jump-started its push to compete with Google in the online ad services market.
In a letter to Time Warner’s board of directors released Monday, billionaire investor Icahn labeled the potential AOL-Google deal as “disastrous” because it may rule out potential future deals AOL might do with Google rivals such as eBay Inc. (Research) or Microsoft.
Shares of Google (Research) edged lower in after-hours trade on the Nasdaq Tuesday after closing at $429.74. Time Warner (Research) shares edged higher after the bell after closing over 1 percent higher at $17.74 on the New York Stock Exchange.
http://money.cnn.com/2005/12/20/technology/aol_google.reut/index.htm?cnn=yes
for me this is awlful news I am tired of google. Maybe Gates will buy yahoo? greek39
Wow, I didn’t see that one coming!
I wonder what MSN will do now.
I really believe Mr.Gates to be the smartest one out of them all. I bet he comes out swinging, I hope anyway.
Didn’t see it coming .. really ?
While I am a fan of Microsoft (as I remember how hard it was to do things BEFORE they got on the scene) … but Bill Gates is simply to dominant a player to sit on the sidelines in any joint venture.
Basically, it seems that there was no way that Google and Microsoft could really worth together in harmony … tHe Google guys would still want to run things their way and Microsoft would want some inmfluence.
Google don’t fear AOL at all – and believe that they’ll be left to run things as they see fit – as long as they’re returning a profit.
Google and Microsoft will never work together, I agree.
But I do think Microsoft could have snatched up aol search and that would have changed the entire search situation.
I do believe that google now will continue to rule for some time to come.
Why the heck would… No. Just no.
AOL!? WHY!?!!! Man, I HATE AOL… Uh. Sorry :Ohno:
Stepping outside the fact that google doesn’t have me listed yet… after almost a year, I love google.
Love / hate relationships are good and all… But not when it’s AOL and Google
As a programmer and a gamer, I hate microsoft. I only use windows because the linux distrobution I like hates my computer.
