Time Warner’s AOL has reportedly approached Microsoft and promoted itself as an alternative to Yahoo following Microsoft’s decision at the weekend to call off its planned takeover of the web search company. According to a report in today’s The Times newspaper, Microsoft is understood to be in preliminary talks with Time Warner about buying AOL, the media group’s Internet unit. AOL was previously linked to a tie-up with Yahoo as the search company attempted to fight off Microsoft’s long-running acquisition effort. Today’s new report states that Microsoft is now keen to find alternative acquisitions to increase its Internet presence and is interested in AOL’s similarity to Yahoo; AOL has an estimated 85 million unique users and a healthy advertising base.
In Monday trading Yahoo shares tumbled after Microsoft ended its three-month-long courtship of the company. Shares of Yahoo fell as much as 20 percent in early Nasdaq trading before recovering to close at US$24.37, still down 15 percent and far below Microsoft’s initial US$31-per-share offer. Yet Monday’s closing price was up from the US$19.18 Yahoo closed at the day before Microsoft made its offer public on 31 January. At the weekend, Steve Ballmer, chief executive of Microsoft, tried to win Yahoo by adding US$5 billion to his bid, lifting it to US$33 a share. Yahoo co-founder Jerry Yang is understood to have argued that he would not accept anything below US$38. Microsoft published a letter sent to Yang at the weekend, detailing its decision to walk away. Some observers believe that Yahoo’s failure to fall back to its pre-offer level may reflect investor belief that an agreement with Microsoft could still be revived.