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Time Warner chief executive Dick Parsons, seen
here in 2002, shrugging off the threat of a shareholder revolt led
by billionaire investor Carl Icahn over his plans for AOL, said the alliance with Google was the right
choice for his troubled media group.
(AFP) |
Google Inc. and America Online Inc. have expanded their search and
advertising alliance to include video and instant messaging, shutting out
Microsoft Corp., which had fought hard for a deal with Time Warner Inc.'s
AOL unit.
Google will also invest $1 billion for a 5 percent stake in AOL.
America Online said Tuesday that Google had agreed to the investment,
as part of an enhanced agreement where Google will move beyond text-based
advertising to allow AOL to sell graphical ads to Google's fast-growing ad
network.
The stake effectively values AOL at $20 billion, a
key benchmark should Time Warner elect to spinoff or sell a part of its Internet unit
in response to dissident shareholder Carl Icahn's proxy campaign to
break up
the company.
Terms of the deal call for AOL to make more of its Web sites searchable
via Google search, including a plan to feature AOL's premium video
services within Google Video, a way of searching for Web-based video
programming.
The two companies also said they had agreed, under certain unspecified
conditions, to allow users of Google's recently introduced instant
messaging system Google Talk to communicate with users of AOL's
market-leading AIM instant messaging service.
Ahead of the announcement, analysts called the new agreement a major
defensive win for Web search leader Google, depriving Microsoft of a major
customer that would have jump-started its push to compete with Google in
the online ad services market.
In a letter to Time Warner's board of directors
released Monday, billionaire investor Icahn labeled the potential
AOL-Google deal as "disastrous" because it may rule out
potential future deals AOL might do
with Google rivals such as eBay Inc. or Microsoft.
Shares of Google edged lower in after-hours trade on the Nasdaq Tuesday
after closing at $429.74. Time Warner shares edged higher after the bell
after closing over 1 percent higher at $17.74 on the New York Stock
Exchange.
In an announcement released by the two companies Tuesday, Time Warner
Chairman and Chief Executive Officer Dick Parsons said: "We're very
pleased to build significantly on our special relationship with Google in
a way that will meaningfully strengthen AOL's position in the fast-growing
online advertising business and help drive more advertisers to its Web
properties.
Google CEO Eric Schmidt described AOL as "one of Google's
longest-standing partners."
"We are thrilled to strengthen and expand our relationship," he said.
Parsons said the agreement would help realize the potential of AOL's
large online audience.
"As digital technologies continue to drive industries together, the
great value and opportunity inherent in Time Warner's structure and array
of premier businesses becomes increasingly clear. A critical piece of this
strategic alliance will be our content, which we will be making more
accessible to Google users," Parsons said.
Google, founded in 1998 by Stanford Ph.D. students Larry Page and
Sergey Brin, is the global leader in search technologies.
AOL operates the largest Internet access subscription service in the
United States.
(Agencies) |