Monday, October 17, 2005

Mon - AOL announcement in next few of weeks

AOL's future structure could be agreed and announced in the next few weeks. It looks like the wrangling for AOL between Microsoft and Google will soon come to a fascinating and hi-stakes conclusion.

On the one hand you have a potential join-venture with Microsoft's internet assets in a newly formed company with the AOL portal at the heart, that could even get spun off as a separate entity. The other option sees Google or even recent bidder Yahoo get involved merely as investors.

The conclusion will not only say a lot about how much the suitors are willing to pay, but also about Parsons vision for not just AOL but Time Warner as well. A deal with Microsoft means he wants to unlock value and spin AOL off, and a deal with Google means he is more interested in retaining AOL as an integral part of the Time Warner group. The former could create more short term value and the latter more long term value.

With Carl Icahn breathing down his neck Parsons may be happy to lock in Microsoft and shorter term benefits. And there is a lot at stake. Analysts at Bear Stearns believe the implied value of AOL's portal business in Time Warner's stock price is $8bn. However, if valuations applied to internet groups such as Yahoo and Google were applied to AOL, its portal business could be worth $15bn.

So, as if he needed more pressure, Parsons has a key decision to make. It could define his entire future at Time Warner.

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