Replies to post #1819 on Alphabet Inc (GOOG)

[SeriousMoney]

No thx, but you're welcome to! Never shorted anything... except maybe some change!

[SeriousMoney]

Google Poised to Invest $1 Billion in AOL
By Chris Gaither, Times Staff Writer, latimes.com
4:01 PM PST, December 16, 2005

Google plans to invest $1 billion in Time Warner's America Online in a deal that, if completed, would deepen the ties between two Internet advertising giants and leave rival suitor Microsoft in the cold, people familiar with the negotiations said today.

After months of much-publicized talks with both companies, Time Warner Chief Executive Officer Richard Parsons called Microsoft Chief Executive Officer Steve Ballmer this morning to say he had agreed to a deal with longtime partner Google, according to three people familiar with the discussions.



"Google pays a $1 billion premium for an insurance policy that insures domination of a very valuable part of the Internet economy," said Jordan Rohan, an analyst with RBC Capital Markets.

The Time Warner board must still approve the deal. It is scheduled to meet Tuesday, said a person briefed on the company's plans who, like others, would speak only on condition of anonymity because of the sensitive nature of the talks.

Google, Time Warner and Microsoft declined to comment.



Seeking a foothold for its nascent search engine technology, Microsoft had waged a nearly yearlong effort to replace market leader Google as the provider of ads for AOL's search engine. Microsoft and Time Warner discussed a variety of options, including forming a joint venture combining much of their Internet operations and possibly Microsoft taking a minority stake in AOL.

When word of Microsoft's overtures leaked out in October, Google began fighting to keep AOL, a partner that had generated 10% of Google's $3.2 billion in revenue last year.

To close the deal, Google made some key concessions.

Its negotiators agreed to promote AOL's services across Google.com, a change for the company that made famous the sparse white Web page. Google also hired AOL to sell non-search ads to Google's advertising partners.

Google will continue to take 20% of the revenue generated when people click on the text ads in AOL Search, and AOL will take 20% of the revenue from flashy banners and other display ads it sells on the Google network, according to people familiar with the deal.

Google also agreed to make an investment that would give AOL, which has dragged on Time Warner's stock as its dial-up Internet access business shrank, an implied value of $20 billion.

"AOL's relevance on the Internet was highly questionable to investors 12 to 18 months ago," said Rob Sanderson, media analyst with American Technology Research. "Now it's definitely moving in the right direction."

For its part, in addition to keeping an important source of revenue, Google gets to put AOL's treasure trove of video clips — from music videos to movie trailers to TV reruns — into its own search engine.

Parsons and Google CEO Eric Schmidt shook hands on a deal in Time Warner's New York headquarters about 9 p.m. Thursday, according to a source close to Time Warner.

The five-year deal, if approved Tuesday, would expand the two companies' partnership into 2011.



http://www.latimes.com/business/la-121605aol_lat,0,4828775.story?coll=la-story-footer&track=more....

[SeriousMoney]

AOL's Choice of Google Leaves Microsoft as the Outsider
New York Times
By SAUL HANSELL, December 19, 2005

This time, it was Microsoft that was snubbed at the last minute.

In 1996, America Online agreed to offer Netscape's Internet browser to its five million customers. A day later, the nonbinding agreement was shunted aside when AOL announced that it had instead chosen Microsoft's Internet Explorer browser in a $100 million deal.

As recently as two weeks ago, Microsoft executives said they believed that their company was going to win the endorsement of Time Warner, AOL's parent, to form an advertising venture with AOL and become its provider of Web search technology.

But tomorrow Time Warner is expected to announce that it will instead renew its three-year-old partnership with Google as the provider of search technology. The deal, in which Google will invest $1 billion for a 5 percent stake in AOL, will also significantly expand AOL's advertising opportunities on Google sites, among other things.

The turn of events shows just how much Google - hotter now than Netscape was nine years ago - has supplanted Microsoft as the force to be reckoned with in technology. And it raises questions about Microsoft's stated goal of becoming the leader in Internet searching, as well as about its emerging plans to offer more online services under a new brand, Windows Live.

"I thought Microsoft would pay just about anything to get this," said David B. Yoffie, a professor at Harvard Business School. For Microsoft, he said, "AOL was the single best way to gain market share."

Yet Google found a way to trump Microsoft's hoard of cash, in part because losing to Microsoft was a strategic risk. Mr. Yoffie characterized the deal as "crucial and purely defensive" for Google because it "prevents Microsoft from being credible in search."

For years, Microsoft and its chairman, Bill Gates, won business from AOL and many others with money, power, technology and a presumed dominance of technical standards. For many Internet companies, it appeared to be the safest partner (despite continuing regulatory scrutiny of its business practices), much as I.B.M. was considered the surest bet for computers and information technology by a generation of corporate managers.

But for Time Warner, it was Google that appeared to be the safe choice in uncertain times. Google's search technology has been the leader in innovation, its advertising network has been a volcano of cash for AOL, and its brand is the hottest of all Internet companies.

Moreover, under this deal AOL will get assistance from Google that it did not have before. Google will help AOL in sending traffic to AOL's free, advertising-supported Web sites. It will also give AOL the ability to offer its existing advertisers search ads for the first time and will allow AOL's sales force to sell display advertising on Google's extensive network.

Microsoft - despite its many advantages, including promoting MSN services on Internet Explorer and on the Windows desktop - has not been able to become a clear leader in any online business. While MSN has strong global operations and some popular products, like its Hotmail e-mail service, it ranks third in reach in the United States behind Yahoo and AOL.

Like AOL, MSN's strategy has oscillated in recent years. For a time, MSN tried to compensate for a decline in its dial-up Internet access business with fee-based subscription services meant for broadband users, which proved unpopular. Then it pulled back from consumer marketing and diverted much of its resources away from MSN's advertising-supported Web portal to build an Internet search business meant to rival Google.

Meanwhile, Yahoo became a strong No. 2 in searching to Google by spending $2 billion to buy Inktomi, a Web search firm, and Overture Services, a Web advertising company. Microsoft's progress in searches and search-based ads has been slower because it is trying to build an entire business from scratch.

Now, Microsoft is building a second portal at Live.com and plans to introduce improved e-mail, instant messenger and other services under the Windows Live brand. At the same time, it is increasing its hiring to revive the MSN portal.

Even without paying much attention to the MSN portal, Microsoft was able to earn its first profit from the online unit in 2004 because of the booming market in online advertising.

In Microsoft's fiscal year ended in June, MSN had $2.3 billion in revenue, of which $1.4 billion was from advertising and $417 million came from operating income.

Still, Microsoft, despite its lagging position, had some appeal for Time Warner executives. Combining Aspects of AOL and MSN could have created a third online network with resources and users to rival Google and Yahoo.

For a while, there was a discussion of a complicated merger of AOL and MSN. But AOL decided that it could not split its advertising-supported portal away from its Internet-access business, which Microsoft did not want.

And Microsoft decided that it did not want to contribute its e-mail, messenger and, most important, its new Live.com portal to the venture. That left AOL worried that a new version of the joint venture would have to compete with online services owned exclusively by Microsoft.

After those talks broke off in mid-September, and Google reached out to try to win a renewal of its contract with AOL, Microsoft came back with a proposal to form a joint venture that would sell advertising on AOL, MSN and eventually other sites.

But AOL concluded that such a deal would make its reported revenue and profit decline, because that would require moving its profitable Advertising.com unit into a joint venture, with the income disappearing from Time Warner's books. This would have undermined the Time Warner objective of improving its stock price, particularly in light of continuing criticism by the investor Carl C. Icahn.

Moreover, a technical analysis by AOL engineers two weeks ago raised questions about Microsoft's advertising software and argued that the software that AOL had purchased from DoubleClick, the marketing software company, was better.

Now that Microsoft has lost the contest for AOL, it must find a way to regain traction on the Internet. Microsoft executives acknowledge that its search engine is not quite as good at producing relevant results as Google, but they promise innovations that will soon overtake its rival. The company is testing its Ad Center software for search advertising and hopes to replace Yahoo, which now sells MSN's search ads, this coming spring.

Microsoft's revival of MSN and its creation of Live.com are meant to allow users to choose among feeds of content from anywhere on the Web, like the service My Yahoo and the new Google home page.

A Microsoft spokesman, Adam Sohn, said, "Live.com is the set of services you use in your everyday life, and MSN becomes the place you go to get some content."

Microsoft is also counting on the link between a new version of its operating system, called Windows Vista, to be introduced next year, and the Windows Live Internet services to give it an advantage. For example, it plans to offer a search function that will not only search the Web and users' desktop computers, but their office networks as well.

Whether this connected search approach will enable Microsoft to dominate the Web as it has dominated the desktop with Windows, and browsers with Explorer, remains to be seen.

Steve Lohr contributed reporting for this article.

http://www.nytimes.com/2005/12/19/business/media/19aol.html