Yahoo! is continuing to buy Time Warner's AOL business, following Microsoft's assertion it is no longer interested in acquiring the search company, reports Bloomberg, quoting unnamed sources.
The report comes days after former Yahoo! CEO, Jerry Yang, stepped down from the role after failed talks with Microsoft. Yang rejected a USD33 per share offer from Microsoft earlier this year, which brought mounting pressure from shareholders.
Yang also failed to secure a proposed search deal with Google to fruition, which would have increased Yahoo!'s operating cash flow by up to USD450m.
According to two unnamed sources close to the situation, Yahoo! and Time Warner have met several times in the past few weeks to discuss terms of a possible deal. Time Warner would give AOL's advertising business to Yahoo! in exchange for a stake in the combined company, say the individuals, who declined to be named.
However, there are still disagreements between the two sides and an agreement may not materialise, they add.
Jeff Lindsay, analyst at Sanford C Bernstein, says a merger would be high-risk given the different cultures of Yahoo! and AOL, even if it would bolster Yahoo!'s position in the display ad market. The two firms would also need to cut about 3,000 jobs for the deal to work, he says.
According to All Things Digital, the main sticking point between the two firms is price. Time Warner wants USD6bn for AOL in the proposed merger, while Yahoo! is willing to pay around USD4bn, the blog says.
The merger would create the world's largest email provider, with a combined 48% share of the market, according to comScore data. In comparison, current market leader Microsoft holds a 42% share of the email market. The merged entity would also control 39% of the global instant-messaging sector, trailing behind Microsoft's 55%.
StrategyEye's related companies: Time Warner Cable, AOL, Yahoo!, Microsoft
