Google Holds Talks With Comcast to Invest in AOL

NEW YORK, 14 October 2005 — Web search engine Google Inc. and cable company Comcast Corp. are in discussions to buy a stake in Time Warner Inc.’s America Online, two sources said, in a deal reportedly worth as much as $5 billion. An investment would set the stage for an alliance marrying Time Warner’s trove of programming and Google’s popular search and e-mail services with Comcast’s high-speed Internet portal and experience in cable video distribution and telecommunications.

It would also create a powerful new challenge to Internet media company Yahoo Inc. and software giant Microsoft Corp. Under one idea, Google and Comcast would jointly own half of the AOL web businesses, though Time Warner would retain a controlling stake, the Wall Street Journal reported in its Thursday edition. Google and Comcast are valuing AOL’s content business at about $10 billion, which implies a valuation of as much as $5 billion for the minority stake, the Wall Street Journal said.

One source close to the deal, however, told Reuters that Google and Comcast could make an investment in the entire AOL business, which would lift the deal value to more than $5 billion. Google and Comcast face competition from Microsoft, which is also holding talks with AOL, one source told Reuters on Wednesday.

Time Warner and Comcast declined comment. A Google spokesman also declined comment, saying only: “Google and AOL have a healthy global partnership and AOL remains a valued partner.” Time Warner, which has faced criticism over its strategy from billionaire investor Carl Icahn in recent months, sees AOL as a centerpiece to its future growth. The talks between AOL, Google and Comcast progressed over the summer, but one source warned that the discussions were still in early stages and could fall apart.

AOL contacted Comcast earlier this summer and has held separate discussions with Google over potential investments, the sources said. Google, which derived about 11 percent of its first-half revenues from a deal with AOL, has discussed with AOL interest in AOL’s free Web-based services, such as instant messaging and programming. In addition, Google contacted Comcast last week over possible interest in executing a joint investment, one source said.