Jonathan Berr

Microsoft Gains in AOL Stakes

 

Microsoft's (MSFT) links with Time Warner (TWX) may give it an edge in the rapidly shifting battle for America Online, analysts say.

On Thursday, it emerged that Yahoo! (YHOO) had dropped out of the bidding for a partnership with AOL, citing the high price tag being sought for the Dulles, Va., Internet property. That potentially slims the race for AOL allies to Microsoft and Google (GOOG), which may be bidding along with media giant Comcast (CMCSA).

But some investors believe Google could end up being an also-ran. Microsoft, the world's largest software company, and Time Warner, the world's biggest media company, share a strong emphasis on intellectual property, says Rob Enderle, a principal analyst with Enderle Group in San Jose, Calif. He notes that Microsoft is fighting against the spread of the Linux free operating system, while Time Warner is battling against Internet pirates.

"The marriage between Microsoft and Time Warner makes a lot more sense based on the history of the business than a Google-Time Warner combination," adds Mark Stahlman, an analyst with New York-based Caris & Co. who rates Microsoft and Yahoo! buy and Google above average.

Still, beating Google won't be an easy feat for Redmond, Wash.-based Microsoft. As with all deals, the final issue will come down to price.

Time Warner is looking for a partner for America Online, which continues to hemorrhage dial-up subscribers while boosting advertising revenue. Time Warner is looking to boost its moribund share price, which has prompted complaints from dissident shareholder Carl Icahn.

"I am not sure everything else combined can trump that," Tony Ursillo, an analyst with Loomis Sayles in Boston who follows the software industry, says of the price issue. "It's a financial transaction first and foremost."

TheStreet Premium Services

Jim Cramer
Jim Cramer's Action Alerts PLUS:
Trade right alongside a Wall Street pro — enjoy access to his Charitable Trust portfolio and be sent trade alerts BEFORE he makes a move. Learn More
OptionsProfits
OptionsProfits:
Get 50+ trade ideas a week from the industry's top options experts. Plus — exclusive commentary on market trends and essential trading tools. Learn More
Real Money
Real Money:
Our team of professional Wall Street Pros — including Jim Cramer, Doug Kass, and Nicholas Vardy — delivers intelligent analysis, timely trade ideas, and colorful commentary. Learn More
Stocks Under $10
Stocks Under $10:
Break into the market with small- and mid-cap stocks... all $10 or less! David Peltier tells you exactly which low-priced stocks he's buying and selling. Learn More
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
blog comments powered by Disqus
Dow Jones S&P 500 NASDAQ 10-Year Note
12,393.45 1,310.33 2,827.34 15.81
Oil *
101.78
DOWN
26.41
DOWN
2.99
DOWN
10.02
DOWN
0.44
10 Yr
1.58%
SPDR Gold
151.62
-0.21%
-0.23%
-0.35%
-2.71%
Data delayed 20 minutes

Top Stories and Tools

Articles From

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

We respect your privacy.
Podcasts

Connect with TheStreet