Replies to post #1857 on Alphabet Inc (GOOG)

[SeriousMoney]

thx D! Any TWAGs for 1/20/06 expirations?

Looking hard at supra-500 calls!

[SeriousMoney]

GOOGLE CUBED?

Investors Like Possible AOL-Google Deal
AP, Monday December 19, 2:31 pm ET

Investors Send Google Shares Up to Another 52-Week High on Deal With AOL

NEW YORK (AP) -- Google Inc. investors seemed pleased with the news that Time Warner Inc. is expected to sell a 5 percent stake of internet service provider AOL to Google Inc. for $5 billion, sending shares of Google to another 52-week high Monday.

While a number of bidders, including Yahoo Inc. and Microsoft Corp., were thought to be negotiating to buy a stake in America OnLine, it is widely reported that AOL is now in exclusive talks with Google, and an announcement may come as early as Tuesday.

Wall Street analysts approved of the deal. Merrill Lynch analyst Lauren Rich Fine left her rating on the stock at Peer Perform, and wrote that it would be a wise move given the fact that AOL is Google's largest customer, accounting for an estimated $600 million, or 10 percent, of 2005 revenue.

Bear Stearns analyst Robert Peck not only liked the AOL deal, he also speculated Google could be on the verge of entering the hardware space, with some sort of "Google Cube," a small box with various wireless ports, which could be used to connect a personal computer, stereo, or personal video recorder.

"In fact, Google could over time become more of a hardware company than anything else," Peck wrote in a research note.

Shares of Google, a Mountain View, Calif.-based search engine, were up $5.64 to $445.79 in afternoon trading on the Nasdaq, after earlier changing hands as high as $446.21, surpassing the prior year-high of $432.50 reached Friday. Shares of Time Warner, which have traded between $16.10 and $19.74 over the last year, were down 2 cents, at $17.97, in afternoon trading on the New York Stock Exchange.

http://biz.yahoo.com/ap/051219/google_mover.html?.v=1

[SeriousMoney]

What if AOL is spun off with GOOG still holding? http://www.investorshub.com/boards/read_msg.asp?message_id=8939524

Comments:

Interesting thought process. And not far fetched, IMHO. I guess they could still get "bought" vs. an IPO, but the question is "by whom?" The GOOG relationship diminishes the value for any other obvious buyer (e.g. YHOO conceivably cut out from installing Overture, likewise MSN with their Search). Maybe IACI would take a run if they were willing to forego Ask powering AOL search (a reasonable assumption, certainly now, for them to get any deal done). An IPO would almost certainly be at much higher multiples, but in any case GOOG wins. Not a bad bet, John.

- Stuart Posted by: Stuart MacDonald at December 18, 2005 02:44 PM | Comment Permalink
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John,

You're spot on. I made the point that we very well could be seeing an AOL IPO, Part Deux in the offing. While I don't think GOOG had an AOL IPO in mind [or at least not as a driving factor in the AOL stake], I DO think Time Warner had the $20 billion post-money valuation in mind when they agreed to the $1 billion from Google in exchange for 5%.

You may have seen my post directly or on tech.meme, but if not...

http://woodrow.typepad.com/the_ponderings_of_woodrow/2005/12/aol_ipo_part_de.html

Posted by: Jason Wood at December 18, 2005 07:15 PM
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AOL 60 billion post-IPO !!! Good grief !

I would base the value of AOL on 2 facts. Current earnings and the expected growth in earnings over the next 2 years. Is this data too confidential to be blogged.

Posted by: Rajesh Patil at December 19, 2005 12:14 AM

60 billion? You are crazy. ;-) As Rajesh says we need to know the earnings an expected growth in earnings to value AOL. With actual earnings of 1-2 billion $ and an annual earnings growth of 20% I could accept 60 billion $.

Posted by: Jojo at December 19, 2005 06:03 AM
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John - I agree with your post for the most part, but there are two other reasons why Google would invest: to protect revenue and keep Microsoft at bay. Both of those are just as important as the value of the investment increasing at this point.

Posted by: Damian at December 19, 2005 08:06 AM

http://battellemedia.com/archives/002137.php#comments