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Google seeks to cash out of AOL stake

Google Inc. has asked Time Warner Inc. to buy back its 5% stake in AOL at current market values, reflecting continued deterioration in AOL's business prospects.

Time Warner Chief Financial Officer John Martin said during a conference call following Time Warner's fourth-quarter earnings release Wednesday that Google contacted the media company last week seeking to exercise its "demand registration statement" on its AOL stake.

"After careful consideration, we made the decision that we needed to exercise our rights now so we could be in a position to sell our interest when the timing made sense for us," a Google spokesman said in a statement."AOL remains an extremely valued partner, and we'll continue to work closely together to provide their users with the best search experience possible."

Google paid $1 billion for the stake when it took over the search functions on AOL's media properties in 2005. That deal valued AOL at $20 billion, but the search giant recently wrote down the value of its investment, suggesting AOL is now worth only $5.5 billion.

Martin said Time Warner is evaluating its options, which include spinning out Google's AOL stake to the public, delaying a decision for a period of time or buying back the stake.

"We can move ahead to potentially buy back Google's stake at an appraised value which would obviously be well below the value that was placed on at the time of the original investment," Martin said.

Time Warner reported Wednesday that it swung to a fourth-quarter loss on $25 billion in write-downs, which included an asset impairment charge on AOL. The web company, which merged with Time Warner in 2000, is mired in an advertising slowdown, and Time Warner is struggling to find a deal that will prevent the business from continuing to weigh on the media empire's overall market value.

Time Warner's report cited an 18% decline in advertising revenue for AOL and the unit's revenue dropped to $968 million from $1.25 billion. Time Warner recently disclosed that it planned to eliminate 10% of AOL's employees as it seeks to cut costs and realign the business.

AOL had a 4.1% share of the U.S. online search market in December, according to Nielsen Online, while Google had a 63% share.

Time Warner Chief Executive Jeff Bewkes said the company is still looking at a variety of strategic options for AOL, and he declined to provide a timeline for when the company could get a deal done to resolve the situation. The media company has explored deals for different parts of AOL with Microsoft Corp., Yahoo Inc. and Earthlink Inc.

Google Chief Executive Eric Schmidt said in a statement at the time of Google's investment in AOL that,"Our investment underscores our recognition of AOL as a valuable strategic asset and our desire both to contribute to and participate in its future success."

Time Warner shares recently rose to $9.50 in after-hours trading from the Wednesday close of $9.42.

Источник: Total Telecom

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