AOL in Talks to Merge With Yahoo?

By
Tim Armstrong and Arianna Huffington.

What's better than one struggling nineties Internet giant? Two struggling nineties Internet giants becoming a single bloated one! Bloomberg is reporting today that AOL CEO Tim Armstrong is in talks with Yahoo advisers about mashing the two companies together just days after Yahoo's board voted unanimously to fire its CEO Carol Bartz. One idea would be for Yahoo to buy AOL and appoint Armstrong the CEO of the hybrid. News of talks comes from two anonymous sources, and is admittedly "unlikely," Bloomberg reports, owing to AOL's declining revenue and the fact that both companies are suffering similar challenges adjusting to an online world dominated by Google and Facebook. Whereas Yahoo was once valued at $80 billion, its worth has fallen more than 80 percent to $18.2 billion, while AOL is even worse off, having lost nearly $800 million since separating from Time Warner in 2009. AOL, which still generates cash from its dial-up service but has had a much more difficult time finding advertisers, now has a market value of $1.6 billion.

Neither organization is on very solid ground right now. Earlier today, it was reported that Yahoo's chairman of the board, Roy Bostock, who fired Bartz over the phone this week, has been urged by investors to resign, along with his fellow directors. AOL, meanwhile, after their $315 million purchase of the Huffington Post earlier this year, is in talks for a private takeover as losses continue to mount. What could go wrong?

Update: AOL's stock closed on Friday down 5.3 percent at $14.72, while Yahoo gained 0.3 percent, finishing the week at $14.48.

Related: What’s Next for Yahoo After Carol Bartz?
AOL Said to Discuss Deal With Yahoo Advisers [Bloomberg]