It seems whenever discussions between Yahoo! Inc. [YHOO] and Microsoft Corp. [MSFT] break down, rumors that either or both companies are talking about a deal with AOL LLC pick up. So guess what? Reuters is reporting today that AOL is talking to Yahoo! and Microsoft about an acquisition and those talks have taken on a new sense of urgency due to Yahoo!'s fast-approaching Aug. 1 shareholder meeting.

Yahoo! has been most closely linked to an acquisition of AOL for the obvious reason that such a deal would represent an alternative to Yahoo! being acquired by Microsoft. For Microsoft, AOL is a makeshift Plan B if it can't acquire Yahoo!, though it would help it more in online display advertising than search, the area it is looking to bolster with an acquisition of Yahoo!. But if the two companies are in a bidding war for AOL, expect Microsoft's deep pockets to win out and Yahoo! once again to be left to its own devices.

Perhaps the most interesting aspect of the AOL talks, if they are indeed happening, is that Time Warner Inc. [TWX] could actually be able to unload its unloved and unwanted property for a decent price. If there is a bidding war for AOL, it could come out looking OK, though the stench from its 2000 merger with Time Warner will linger for some time. - David Shabelman

See July 16 story from Reuters
See July 15 post on possible AOL acquisition from Silicon Alley Insider
See May 21 post on Time-Warne from TheDeal.com