AOL Eyes Breaking Itself Up, Possible Merger with Yahoo

AOL logoOnce upon a time AOL was the place where many internet users went to get online. Back in the heyday of dial-up internet, AOL was wildly popular. The company was also known for the hoards of floppy discs (and later CDs) that seemingly showed up in mailboxes and at checkout counters around the country in endless supplies.

The break up of AOL could be very complex reports Reuters and the plan could involve a merger with Yahoo. Any plans AOL might have in the works are in very early stages and according to sources – Yahoo hasn’t been contacted at this point. The new plans and talks of mergers and breaking AOL up are modified version of plans that go back to 2008 and 2009 before Time Warner spun AOL off.

Plans at the time had AOL selling its dialup business to EarthLink. The catch today is that EarthLink has just agreed to spend $516 million to purchase DeltaCom and that purchase price ties up just about all of EarthLink's money.

Analyst Todd Rethemeier says that a merger of Yahoo and AOL web properties would make sense with the Yahoo page strength in sports, news, and email with AOL having strength on maps and entertainment news. The two web properties would complement each other well. Rethemeier estimates that AOL's dial-up business is worth a bit over $1 billion of the $2.4 billion in revenue of the company as a whole this year.

If the dial-up business is spun off and sold, it could fetch as much as two or three times earnings before interest, depreciations, and other things according to Brian Pitz from UBS.

Pitz said, "I don't think as a standalone either Yahoo or AOL are going to be as competitive as they once were. One plus one might equal two and a half."

One reason for the focus on selling the dial-up business AOL owns is that analysts think Yahoo might not be interested in such ancient connections. One of the sources that spoke to Reuters said, "The issue is Yahoo has no interest in dial-up, and with the traffic flow between the businesses, it is not easy to sever."

Tags: AOL, Yahoo

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