Google, Comcast in talks to invest in AOL - sources

Kenneth Li

NEW YORK: Google Inc. and Comcast Corp. are in discussions to buy a minority stake in Time Warner's America Online, two sources close to the deal said on Wednesday.

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..

But Google and Comcast face competition from Microsoft, which is holding serious talks of its own with AOL, one source said.

Time Warner and Comcast declined comment on a possible deal, first reported by The Wall Street Journal. A Google spokesman declined comment on the talks, saying simply, "Google and AOL have a healthy global partnership and AOL remains a valued partner."

Time Warner, which has faced heavy criticism over its strategy from irate billionaire investor Carl Icahn in recent months, sees AOL as a centerpiece to its future growth.

The talks between AOL, Google and Comcast have 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 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.

Since then Google and Comcast have discussed taking a joint minority interest in the online unit of Time Warner Inc.

This would not be the beginning of cooperation between the three companies. About 11 percent of Google's revenue in the first half of 2005 came from a deal with AOL.

Google also has held discussions with Comcast on its high speed Web site strategy. Comcast aims to tap into the online advertising business as well as experiment in how it can translate its expertise in video distribution to the Internet.

Google and Comcast will have to move quickly as Microsoft continues its own overture to AOL. Comcast and Google have not yet drafted a formal plan to invest in AOL, the sources said. One source said the deal, albeit attractive to Comcast, was not "critical" to the company.

AOL's talks with Microsoft are much further along, one source said. "Microsoft has had a head start," the source said. "There have been deal terms and term sheets."

Separately, myriad companies have contacted Time Warner over potential partnerships, including Yahoo Inc., but the Yahoo discussions have not progressed, one source said.
Yahoo was not immediately available for comment.