Google, AOL Confirm Deal

Google(GOOG Quote - Cramer on GOOG - Stock Picks) and Time Warner's(TWX Quote - Cramer on TWX - Stock Picks) America Online unit confirmed late Thursday that they have expanded their current partnership into an agreement that gives Google a 5% stake in AOL for $1 billion.

Time Warner Chairman and CEO Dick Parsons said: "We're very pleased to build significantly on our special relationship with Google in a way that will meaningfully strengthen AOL's position in the fast-growing online advertising business and help drive more advertisers to its Web properties. This agreement is key to fulfilling our commitment to realize the potential of AOL's very large online audience."

Under the strategic alliance, Google and AOL will continue providing search technology to AOL's network of Internet properties worldwide. Plans include: creating an AOL Marketplace through white labeling of Google's advertising technology, expanding display advertising throughout Google's network, making AOL content more accessible to Google Web crawlers and a video-search collaboration.

The companies also will enable Google Talk and AIM instant messaging users to communicate with each other, they said, "provided certain conditions are met."

With its billion-dollar stake, Google will become the only shareholder in AOL other than Time Warner. Time Warner will retain management control and full strategic flexibility over AOL, while Google will have certain customary minority shareholder rights, including those associated with any future sale or public offering of AOL.

The Google-AOL deal has been rumored for several days, prompting much speculation on what the deal means to both company's prospects, as well as Microsoft(MSFT Quote - Cramer on MSFT - Stock Picks), which was left out in the cold. Chief among the deal's opponents is financier Carl Icahn, who has been waging a loud proxy battle with Time Warner's management.