Jerry, Please Don't Buy AOL For $8 Billion

If this deal goes through, you know what it reminds me of? This: "Time Warner to merge with AOL", hehe. Jerry, go in the wayback machine and see how that deal has gone, take a breath of fresh air, then proceed with not closing this deal. Please! You owe it to yourself.

And Jerry, did I also mention:

DON'T DO IT, JERRY! STAY PUT.

The fact that AOL is a 'big bag of quasi-related companies' seems a good thing when you have to make an acquisition (let's not even try to describe this as a merger).

Yang will be able to cherrypick whatever makes sense and dispose (read, sell) the redundant assets without having to do the hatchet job at an individual worker level.

AOL has plenty of very interesting assets that would fit well with Yahoo - and an acquisition would be the ideal occasion to get rid of the excess on both sides.

Finally, the 'new' AOL is still in the process of integrating new technologies and acquisitions. What better time to acquire it, BEFORE it undergoes another reorg?

So this deal does make a lot of sense. The remaining question is: is $8 billion the right price to pay?

Hey Henry,

What's going to happen to AOL/AIM Mail, AOL Radio, and AIM if the Yahoo/AOL erger goes through?

Henry,

You forget that anything that Yahoo can buy, Microsoft can buy and for a lot more money.

If AOL is on the table - I'm calling Microsoft @ 10 Billion, which would include any payments due as a result of dissolving the Google search deal and pushing AOL and all of their properties (ie. Engadget) to Live Search.

Instead of stock buybacks, they could use this to prop up query share, and revenue from all those wireline subscribers.

LF....? I thought I was the only LF here.

Oh yeah, Icahn and el Gordo will really be raking it when Yang buys AOL. You're doin' a heckuva Jerry!

That's why Icahn's rich and I am not.

Maybe you do not want to spend $8B in front of a economic depression. maybe

I've always thought that Microsoft's bid for AOL would be "$500 million more than Yahoo's." At this point, though, it doesn't seem Microsoft is interested.

But we'll see...

microsoft is not interested until somebody else is interested under balmer. he simply throw away the precious cash to get a whole bunch of junks back. they have been picking non-cohesive wars bluntly everywhere. they better spend time to fix their crappy IE and Vista before it too late.

as a long time yahoo i am much more worried about integration of AOL.. we have seen how bad yahoo did with overture... they delayed everything and screwed it up.. some with kelkoo in europe which was a complete disaster and we have seen the jumpcuts, upcoming and other..
i do not have any hope that the folks jerry and sue are capable to handle such a merger... never ever we have seen plenty examples.. what they can achieve and what not..

If I remember my algebra correctly, a negative number plus a negative number is still a negative number. So how is combining two struggling companies a positive? Can anyone provide any example of a merger of two poorly performing companies resulting in a strong company? Perhaps if there is a change in management, but it would better if the acquirer did that before the deal, not after. Yahoo at $10 before the holidays - Merry Christmas.

People can't speech or spelz proper england on here. Seems you can get real angry when your H1B's on the line if you get canned.

Seriously, were the merger to happen, it would be in review for months and likely not anything meaningful in terms of meshing the products for a good while.

I give it 4/10 chance, at best. Like the idea though. I think AOL has some top brands like AIM, ICQ, Moviefone, MapQuest, etc. Yahoo! would get their hands on those jewels in the crown at what will be seen as a bargain price down the road. There is plenty that AOL is doing to survive that Yahoo! hasn't got the talent or nuts for.

But, we'll see what will happen. Should be a good ride.

Henry - stop giving bad advice to Jerry. If you really knew what you were doing, you'd either be running a big company OR you'd still be a real analyst.

YHOO buying AOL makes perfect sense. And YHOO is NOT overpaying. the guys at YHOO know what they're doing and they can UNLEASH THE HIDDEN VALUE THAT'S TRAPPED IN AOL because the dummies at TWX don't know how to run it!

GO JERRY GO!!!!

G

Henry: in many of these posts, I see "except for TMZ...(insert a few other well-performing sites)"
-- but as TMZ is a joint venture with Telepictures (a Warner Bros. co.) are you able to determine what the percent ownership is? Wouldn't that be a hoot...if WB owns 'more than 50%' then it wouldn't necessarily 'come with the package' right? Let's face it: AOL did not create / make TMZ the success that it is. It's all Harvey Levin's personality / drive (see "Celebrity Justice" as early incarnation) matching this content in internet age...could have easily 'gone' to Y! or even M...but AOL were the "people one should speak with first" re: that whole "is there ANY synergy we can still muster outta this pile?"...in otherwords, Harvey got the Mel Gibson bit...and Paris, Michael Richards etc.; but from there it was just "distribution" -- NOTHING to do w/AOL other than they put in home screen.

Well let's see...what are you buying?

platform A....a reduced business, network CPM, bad rep sales force who have seen their revenues drop quarter on quarter for the past year. Portal business...what is it...what products do they have that Yahoo doesn't, and that Yahoo could possibly do with? Executive team...ahhem...next! It's little bit like a grocer buying another grocer on the same street...you can do it, but best thing to do is buy it for a fire sale price and shut it down. I agree you would need to loose about 4,000 people, but don't let dumb and dumber (Ron and Randy) evaluate that for you, I agree the price is too high, but disagree that it's $6BN, it's probably more in the range of $5 to $4BN now. But mainly...WHY? This whole thing is like a masochists convention!

Mrs. Malpropp, you revealed yourself as a bitter AOL employee and therefore we mistrust your opinion. But, you keep taking their pay check and biting the hand that feeds you. Best of luck with that.

I always follow Gordon's comments - he blames AOL for dragging down TWX's shares, a few of which he obviously owns - with much interest.

In reality, Gordon, AOL is still Time Warner's cash cow, and margins are going to get smaller for TWX once they get rid of AOL. Investors - I mean, those that actually know what they're doing - know that.

Also, TWX will lose its only bridge to the on line when they sell AOL. Little recirculation of talent from AOL to other TWX companies does not show that there is little talent in AOL: it shows that Bewkes is fundamentally an off line guy. Despite this, Time Warner will do quite well for a long time without AOL, relying on their traditional business. Until someone else buys TWX and starts the synergy rant again!

So Gordon, the bottom line is: enjoy blaming AOL while you can. You may soon have to find another scapegoat for a bad investment.

Yahoo, please buy AOL... only way my TWX stock goes up I guess :-P

Hmmm, and all others praising the bad idea of yahoo acquiring AOL: you also revealed yourselves as Dulles-happy employees therefore you cannot be trusted either. Probably Trisha's office up at the Rock, hmmmmmmmmmm???

Henry, your analysis on yahoo has been horrible. Your like those ceo's that their stock and options become worthless. Your shares are doing great. Pushing to keep these geniuses on board was ridiculus and that was obvious. The only better thing is that they would let you take over yahoo!!!

full disclosure - i own 800 TWX at $37/share so the last X years has been painful. fortunately, this folly was/is less than 1% of my entire invested liquid net worth. i've been an indexer since 1995 most of my stock position is in low cost index funds. i haven't bought an individual stock since 2000. that being said, i think TWX needs to FOCUS on their CORE COMPETENCY which is media. hand AOL over to the tech guys WHO KNOW HOW TO RUN IT AND WILL GIVE THEM THE FREEDOM AND RESOURCES TO RUN IT RATHER THAN CUT THEM OFF AT THE KNEES. i feel the guys within TWX like having AOL around because THEY use AOL as a scapegoat. if we can sell AOL, the LIGHT WILL SHINE on the people/divisions that aren't delivering.

@gordon - what are you smoking? team yhoo couldn't unleash an unconscious poodle.

happy - that's not my concern. i just want the pig off my fucking balance sheet.

I cannot take it!
Looks like Google could be just playing games with Yahoo. Can you imagine if Google calls the deal off? I can and then Google will have kicked Yahoo in the teeth.
Buying AOL make no sense at all but then neither did walking away from $31.00 a share.
What Sue and butt bongo boy have done to share holders is criminal.

The thing is Gordon, you're wrong. AOL isn't a technology company anymore. All the tech employees (with the exception of a handful at Mountain View) have been laid-off, or are completely leadership void and independently clueless.

I've said it before, I'll say it again. TMZ, Moviefone, AOL Music, Engadget & AOL Finance, are all content companies. MapQuest is an exception rather than the rule. PeopleConnection has virtually placed all its eggs in the Bebo basket, and it runs relatively independent of AOL, with the exception of the occasional Cross-promotion Hyperlinks from AOL content sites.

AOL has a hard to manage dual-mandate. They want to make great-looking sites, but their majority of users are still restricted by the limitations of dial-up.

The splitting of the businesses hasn't alleviated these concerns, as whilst the fiduciary responsibilities to dial-up users have ceased AOL is losing numbers as bandwidth requirements for new sites increase.

The ONE asset AOL has on its side is its content creators. I say that, because despite how much SAI commenters like to criticize picture galleries. This sort of content brings in great numbers, and as long as editors don't start getting too complacent, there should be a good balance of superficial & substance.

So here is where you are wrong Henry. Yahoo is without question ONE OF THE WORST CONTENT CREATORS OF ALL TIME.
Users that wash-up on the Yahoo homepage (through their Browser setting) spend such little time there before they visit Google, to find what they're looking for It's a train-wreck for Yang and Decker.
The responsibility for this disastrous turnout sits squarely on the shoulders of the Yahoo Media Group, and the Product Managers of each and EVERY Yahoo content site (with the exception of solid performer Y!Finance).

You're right, the AOL acquisition is Expensive to say the least, but the alternative is decidedly more Grim.
Given the erosion of Print & Broadcast Television jobs in recent years, one would expect Y! should be fundamentally equipped to recruit their own high-performing content creators with a great track record.
Unfortunately, the past 4-5 years have been testament to Yahoo H.R & management's inability to do so.
So here we are, a massive online collection of RagMags (that may almost be enough to drive people to print), a Free Web-mail and a Photo Service.

Well Whoopy-doo Yahoo.
Don't buy AOL because you know it's too expensive, buy it because you've no other choice!

Henry, If this deal were to happen & hypothetically it were to emerge mid 09 that AOL traffic excluding the dialup subscriber (which of course Yahoo wouldn't be buying under this rumored merger) was actually much less than Yahoo had understood before the deal, & we were all reading on SAI and elsewhere in 09 how the Yahoo board was now ruing this deal, as it had turned out that the majority of all AOL clicks had actually been subscriber clicks that Yahoo wasn't getting, & somehow the full extent of this had been opaque to them before the deal was done, or not fully investigated by them, so that in their anxiety to be seen to do something back in October 2008 they'd gone ahead and diluted their shareholders by buying what had turned out to be a lemon - would it be possible in those hypothetical circumstances for Yahoo shareholders to bring a negligence class action suit against Jerry and the Yahoo board?

MSN + AOL + Yahoo

- formidable spinoff for both Time/AOL and Microsoft. Leave Yahoo in control, but MS and TWX would have significant stakes. In this economy, this would benefit all companies involved.

If you do the same sum based on the next quarter, i.e. 3 x trailing revenues of Q3 annualized it's likely to produce less than $6B, as Q3 will probably be down.

Also AOL's continual use of photo rotation games the system to produce artificially high (or lower real value to the advertiser) ad views, which will reflect in lower CPM's in the end, so that should warrant a reduction of the multiple Yahoo pays, as Yahoo themselves don't seem to employ this devaluing artifice to anything like the same degree.

$6B therfore still high.

@Willville

You bring up some interesting points, and you are absolutely right on some, but also very wrong on others.

Yes, AOL is a content company. Always has been, although unfortunately they haven't always seemed to realize this, and have let their advantage in that area slip noticeably. They've also diluted their content severely lately through such stupidity as now requiring 15 clicks to read a 15-best list (so they can claim 15 page views).

However, in addition to being a content company, AOL is a technology company. You are sorely mistaken if you assume that Mountain View contains the only tech employees left at the company (incidentally, fwiw, Mountain View has always been a very small part of the technology aspect of AOL. Their overall contributions are minuscule compared to the amount that has come out of Dulles).

There are still a lot of extremely talented developers left in Dulles (although due to attrition and layoffs, not nearly as many as were there before).

The problem is that the technology leadership just isn't there. It starts at the top, with TWX and then the unqualified and clueless Falco, and it trickles down from there. The senior leaders at AOL are a bunch of empty suits who only really excel at job preservation and speaking a lot of technojargon (yes Kevin Conroy, this refers to you).

When you say "They want to make great-looking sites, but their majority of users are still restricted by the limitations of dial-up," you are completely missing the big picture.

AOL makes bad sites because that's what the clueless executives mandate. Have you not heard about how Ron Grant mandated that aol.com be redesigned to look identical to Yahoo? The developers can only do what they are allowed to do.

AOL has a lot more in the way of assets than just content creators. Would Yahoo be able to unlock that potential and actually use it in a way that TWX never cared to? good question. hopefully they can, and hopefully it's not too late.

Yahoo needs to buy AOL and do a complete clean sweep on everybody at the VP level and above. Put in some tech leadership there that actually knows what they're doing, and I think you'd be pleasantly surprised at how much of a technology company AOL is.

I suggest 2 FLV Converter for Mac software. One is powerful in download YouTube Videos and convert downloaded FLV files; the other is professional in video converting, which can not only convert .flv video to all media formats, but also can convert all kinds of video formats to .flv, plus popular videos.

@Willville,

I disagree with you on what Mike in the next comment calls AOL's "photo rotation games" - how well can they be monetized, when photo rotations don't foster community and therefore give no one any emotional incentive to make a return visit - they're just photo rotations. And they lead to sites all over AOL's properties - News, TMZ, netscape.aol.com - wherever - another mistake on AOL's part. AOL is sending visitors scatter-shot all over the place to read this paragraph or look at that gallery - and my question is, how the hell do you turn that into monetizable return traffic?

How high is AOL's bounce rate on the home page? How many return visitors are there over one month or more? Why won't they break out those figures? I (and many others, I'm sure) would want to see those figures before deciding if AOL's "photo rotation games" are really worth hanging onto, or buying into if you're a company that needs more traffic - and more eyeballs on your ads - like Yahoo!.

If I ran a huge - and I mean absolutely sprawling - conglomerate of websites, with some highly valuable homepages like aol.com and highly valuable properties like TMZ, I would not be sending my traffic scatter-shot all over the damn place like AOL does with those photo galleries and other nearly useless home page links.

I would pick the three most valuable properties and send my visitors to those - not to look at soulless photo galleries with little to no accompanying content - but to actual web pages with loads of content and images on them, on websites that obviously look they have a lot going on in terms of comments and return visitors.

The websites that home page visitors are clicking out to need to look like they have some life on them (not cold, dead, soulless photo galleries) or people aren't going to come back. You'll always have new visitors, but they'll bounce, too. That leaves you in the position of running remnant advertising against fleeing visitors since better, more expensive ads aren't going to convert enough over time to make the purchase price worth it.

This is just one of many areas in which AOL is completely clueless as to how to best monetize anything.

@Marah Marie & formerlyofCC2

When I talk about technologists incapable of independent thought, I am of course talking about Dulles, I realize this may of course be overstating it. However I'm confident production by Will Morris and his team @ MV surpass Dulles productivity 3 fold.
I'm allowed to have that opinion, and you're allowed to disagree with me.

Say what you want about those photo galleries, the thing is, on the most part, they work.
I concede, I am beginning to think this may well be the final sum of AOL's Content & Technology dept. collaborations. In which case, perhaps Yahoo should just copy this one trick Pony and be done with it.

My recent impressions of VPs and Product Managers @AOL is that they will give anything a go. They seem to commission virtually any project idea with even a glimmer of hope at succeeding. However the ongoing capital to fund and maintain new projects seems to be of notable absence. I.E. Bluestring/Gstring/MGNT, or is that MGMT. Who cares

My point is, Dulles VPs have been digging about in a stable full of Horse turd for years (praying to find a Pony in there somewhere). The only notable products in the last few years have been acquired (usually at a HUGE PREMIUM) and ran unceremoniously into the ground.

So, this goes to show, I do agree with you on some level 'formerlycc2er'. Not only are AOL execs incapable of developing new projects, they're also completely out of their league managing established ones.
It will be interesting to see if current AOL execs are successful in plucking Bebo from the clutch of success, as they were with its predecessors Netscape,ICQ,Winamp, etc (not to mention a lottery of ad networks).

Ultimately the debate isn't whether AOL has engineers who COULD be successful in creating products, because this is about valuing the company for purchase right now. And right now this is a content company, because nothing it is doing in technology is successful or monetized. History shows us nothing Yahoo acquires (incl. employees) is given a hope in hell of surviving.
Yahoo is like a family and acquired employees (not unlike step-children) are best disposed of like a trash bag full of kittens.

Out the window of a speeding Prius.


Umm, k. I'm not really sure what any of that analogy means, but let's just agree the two deserve each other and be done with it.

Yahoo! did alot develop applications, and then buy a company doing the same thing and than bad-integrating it. :O(

Yang doesn't deserve a place at the negotiating table after his mishandling of the microsoft offer.

No way to defend the rejection of a $31 takeover offer with Y! stock now selling for $14.

Ballmer is lucky he got to hold onto $20 billion of good old cash.

Henry...so right.

Why would Yahoo buy AOL? The network ad business is a low margin business. Only thing worse is dialup access. Want another business? Buy Gannett. Please. At least it has yield. You're already partners.

If AOL was a separate stock you could overlay it here
http://finance.yahoo.com/echarts?s=VCLK#chart2:symbol=vclk;range=2y;compare=yhoo;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

How does this help you? Don't say volumne. You'll sound like a CDO salesman.

The whole thing reminds me of the credit bailout mess. AOL is a massive asset deflation that will continue. Why would you want to get on that bus.

Jerry you already own one of the great web destinations...build that business. Quit toying in the swamp that is dialup access and ad networks.

Actually Gannett is not a bad idea. Jerry you could buy the whole thing today for $3.3 B..pick up a pile of UVs and quality inventory and quality content, get married instead of dating, get the newspapers and TV stations almost for nothing.

Couple of bucks left over and I bet you can buy AOL with that if you wait 12 months. God knows why.

@Gordon, I have a similar 'issue' with TWX as you do, I agree with your saying TWX should focus on their core competence of being a media business, and can't wait for TW to unload AOL on somebody, despise being a former AOL employee myself. But one suggestion to both you and me is that, it doesn't matter what was our cost basis, what matters is the future. The money locked up in TWX can very well be deployed on some iShare Ultra Short ETF shares. These non-performing assets should be off the book at whatever price it's at today.

Help!! will yahoo management ever do anything to support it's shares??? help!!!!!

I ever started using google because i'm so disappointing of yahoo...

NEW Real-time: 13.80 -0.78 (-5.35%) 12:15PM ET

Well done, Jerry, well done!

I'm hoping this merger goes through...all the AOL and Ad.com employees who were drinking from the Kool-Aid pump are going to realize how poorly run AOL was and there is no future for them. Have fun finding jobs in this economy...not to mention there is nothing in Dulles and Baltimore for people who have been working for AOL. I'm glad I got laid off a while back...it was much easier to find a job then and everything turned out for the best. Watching AOL pay a ridiculous amount of money for Bebo, buy Tacoda without taking their lawsuit into consideration and still trying to figure out how to improve Quigo is laughable!

i'm tempted to step in and buy 1,000 TWX at $10ish. double down, baby!!!!!!!

Platform-A jumped the shark once Dan Ruch left!

While most of you kept visitors & page hits to this page high, here is the latest. The deal is Off atleast for next 3 quarters. Why? As I heard it, both parties could not come to agreement and both parties are not serious about this entire merge thing. So relax Yahooligans,Aolites,Share holders and the rest of mere curious souls.

Thanks Homer, I too heard that the deal is off. Atleast AOL will clean it's tech mess (with the exception of some of clueless Dullese Techies & some mentally retired Seniors at INDIA who are good at keeping their jobs) and Yahoo has still to go a long way to remove it's major stupid techies, directionless techies at INDIA & USA and the creamy white collar idiots, who are living on past glory. I am so relieved that I did not invest in both the complanies as I always seen the crappy ways of Yahoo struggling to come up with some solid rumour. Good job

You mean to tell me that Yahoo and TWX were unable to complete a deal and to actually get anything done??

SHOCKING!!!!!!

It is simply amazing at how TWX is so unbelievably slow-moving, and not only that how they completely screw up anything connected with AOL.

I held out hope at the beginning that things would be different with Bewkes, as opposed to the utterly useless do-nothing Dick Parsons. oh well...

Does Bewkes realize that every day Falco and Grant remain in power they just destroy the value of AOL even further?

Henry, To you, is merger only about firing people?