Earlier this year, Microsoft made a mammoth unsolicited offer to take over Yahoo…which Yahoo famously bobbed and weaved around and, months later, turned down flat. The refusal irritated a group of Yahoo shareholders—including bilionaire Carl Icahn—who felt Microsoft’s offer represented the best hope for a big payday on their Yahoo stock. Icahn got so upset that he threatened to run his own candidates for Yahoo’s board, take over the company, and spread it prostrate on Microsoft’s doorstep, hoping for a renewed offer. However, Yahoo executives managed to hold on to their jobs, placating Icahn and apparent minority of backers with three seats on Yahoo’s board of directors.
Yahoo’s new board of directors met for the first time yesterday, and according to the Financial Times the board approved a plan to open discussions with Time-Warner about the future of AOL. According to the paper, the two companies are not currently negotiating a deal, but it isn’t the first time the two companies have explored possibilities together: when Yahoo was casting about for alternatives to a Microsoft buyout earlier this year, Yahoo looked to a deal with AOL to bolster its bottom line.
Time-Warner CEO Jeff Bewkes has indicated he hopes Time-Warner will settle the future of its AOL division in the near future. Once the “new media” deal of the century, AOL’s overall performance has become a burden on Time Warner as the service has shifted from a walled-garden of services to a collection of free services as AOL sought to carve out a niche for itself in the online advertising world. Despite a series of acquisitions and rollout of significant new services, AOL hasn’t been able to gain major traction in the consumer arena against the likes of Google and Yahoo. Google remains the dominant player in both Internet search and online advertising; a pairing between Yahoo and AOL may enable both companies to better compete with Google for advertising. However, Yahoo and Google are also moving ahead with their own advertising deal…a move which is drawing the attention of government regulators for its potential impact on competition in the online ad market.