Yahoo Pulls Out of America Online Talks

Friday, November 4th 2005, 9:44 am
By: News On 6

NEW YORK (AP) _ Yahoo Inc. has pulled out of discussions over buying a stake in America Online Inc., leaving Microsoft Corp. and Google Inc. as the leading potential suitors.

The decision to abandon the talks came after Yahoo chief executive Terry Semel and chief finance officer Susan Decker met in late October with Time Warner executives in New York, said Yahoo spokeswoman Joanna Stevens.

Stevens said Yahoo had ``politely passed'' on proposed terms and ``walked away from any interest in a deal.''

Two people close to the discussions said a key stumbling block was Time Warner Inc.'s insistence that it retain majority ownership in the AOL unit. They spoke on condition of anonymity because public discussions of any private negotiations were contrary to their companies' policies.

One of the people, familiar with Time Warner's position, said one arrangement under discussion had called for Yahoo to pay Time Warner in stock worth $13 billion for an 80 percent of AOL's content business, which is growing.

Under that proposal, the person said, Time Warner would keep all of AOL's Internet access business, which is in decline as users abandon dial-up connections for higher-speed cable and DSL lines.

The Yahoo withdrawal was reported earlier on the Web site of The Wall Street Journal.

The interest in AOL comes as the company transforms itself from a declining business focused on providing dial-up access to a provider of free content that is tapping the recent boom in online advertising.

Late last year, AOL abandoned its longtime strategy of exclusivity and began making its rich offerings _ including concerts, news, sports and e-mail _ available through for free, a model Yahoo drove to become the Web's top brand.