Novice Investing - Will AOL Come Online?

Date: Thursday 20th 2008f November 2008 04:02:27 PM

Will AOL Come Online? - 11/30/2005

By: Novice Investing Staff

Three weeks ago, we wrote an article that Microsoft is perhaps the front runner in AOL pursuit. Since then, there is no indication that a deal is imminent soon. What gives? Both sides probably try to get the best deal as much as possible. Furthermore, Carl Icahn as Time Warner investors probably want AOL to be sold as high as possible with his comment here.

A little bit introduction, AOL has put itself up on sale back in the summer of 2005. It has more than 20 million of dial-up subscribers and other contents which some analysts predict to fetch as much as $ 20 Billion. We calculated that AOL's subscribers is worth around $ 10.2 Billion. There is still content of AOL web properties and million of other AOL users connected through its instant messaging.

Microsoft Corp. (MSFT) can afford to pay $ 20 Billion. How about others that are vying for AOL? Google Inc. (GOOG) has a market capitalization north of $ 100 Billion with $ 6 Billion of positive net cash and growing. Comcast, the king of cable, can afford to perk up $ 20 Billion if it means getting a hand off the 20 million AOL subscribers. Out of the three, Microsoft seems to have the deepest pocket with $ 30 Billion + of positive net cash on its balance sheet.

Potential suitors may also feel that the AOL price tag is too steep. It can look at a much smaller competitors in Earthlink (ELNK). It currently trades at $ 1.5 Billion market capitalization. This, however, will make the acquirer play second fiddle to the winner of AOL property.

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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Microsoft Corp. (MSFT) or any other securities.

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