The New York Post reported in its Friday edition that Time Warner has held discussions in recent months with Microsoft regarding a potential acquisition by the Redmond software company of America Online (AOL).
Time Warner is denying the account. MSN officials had yet to comment by the time this article went to press.
Time Warner spokesperson Tricia Primrose Wallace called the New York Post story "inaccurate." "Some parts such as the agreement about working with them on digital rights management are correct. What's inaccurate is that we're in some sort of talks with them about selling AOL," Primrose said.
But a source with ties to Time Warner told Microsoft Watch that The Post's story is on the money.
"AOL is on the block at Time Warner, they've been talking to Microsoft about it for some time," said the source, who requested anonymity. "Apparently, the discussions have been going on for at least three months. They (Microsoft and AOL) have had different on-and-off periods of discussion about this."
The source noted, however, that Microsoft is not the only AOL suitor. "The large cable networks, such as Comcast, are also looking at AOL, so they can bundle it with their cable modem access," the source said.
According to the Post's story, "the deal being discussed within Time Warner would include Microsoft paying cash plus the assumption of debt to acquire AOL."
The story added that, according to sources, "a possible investment by Microsoft in Time Warner Cable has also been considered."
AOL and MSN have been bitter rivals in the online-services business. Both have lost a substantial number of dial-up subscribers in the past couple of years and have been searching for other ways to make money. Other Microsoft divisions have both partnered and competed with AOL and its Netscape division in the past.
One analyst said a Microsoft-AOL acquisition wasn't such a bad idea, but unlikely to make it past federal regulators.
"I think AOL's best home would be in a media company, but their second best home might be with a place like Microsoft," said Jupiter Media analyst David Card. "General-purpose online networks are tremendous promotional vehicles for holding companies that have other media properties."
However, Card noted, "There's no way the FTC, DOJ or FCC would let Microsoft purchase AOL."
Microsoft and AOL have been working closely together since last May, when the two announced a slew of antitrust and technology agreements. As part of the agreements announced by the two former rivals, AOL agreed to license Microsoft's Internet Explorer (IE) browser.
Microsoft also agreed to pay AOL Time Warner $750 million to settle a year-old private antitrust suit lodged by AOL's Netscape unit.
Read More on the May 2003 Microsoft-AOL Agreement Here
Other agreements hammered out between Microsoft and AOL last May included:
Source: Microsoft Watch
- AOL signed on to use Microsoft's Windows Media series streaming audio/video technology.
- AOL and Microsoft agreed to cooperate on rights-management technology in the areas of music, video, voice and text.
- The two pledged to work together on instant-messaging interoperability.
- Microsoft agreed to allow AOL disks to be bundled with the versions of Windows that are sold by "system builders," a k a, smaller PC OEMs.
- Microsoft committed to broaden its services/support for AOL as an independent software vendor partner.