In December 2005, Google Inc. paid a high premium for a 5% stake in AOL in order to one-up Microsoft Corp. before MSFT got its hands on the Time Warner Inc. unit. Google's $1 billion investment valued AOL at $20 billion. Some analysts have suggested
AOL may be worth less than $10 billion now, one report said. Google agrees. In an SEC filing, the Internet search giant -- for the first time -- said that "our investment in AOL may be impaired," meaning it may have to record a loss on its books regarding the stake.
The filing said "[Google does] not believe that such impairment is 'other-than-temporary' at June 30, 2008, as defined under FSP 115-1." ZDnet.com summed it up best: Cutting through the accounting jargon, Google is saying that AOL's value has declined permanently and
won't recover. A Yahoo! Finance article said as part of its investment, Google has the right to demand that Time Warner spin off AOL in an initial public offering of stock or buy back its stake, but Google so far hasn't indicated any interest in going down that path.
Google's assessment comes as Time Warner CEO Jeffery Bewkes announced the
necessary steps to separate AOL's struggling dial-up business (which could go to EarthLink Inc.) from the
content and advertising side (which could go to Yahoo! Inc.) are complete. -
Baz HiralalGoogle believes $1B investment in AOL is crumbling
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