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A favorite Wall Street parlor game right now is to put a value on America Online, the Time Warner ( TWX) Internet unit that is reportedly up for sale.

The deal chatter intensified Tuesday with reports that Steve Case, the AOL founder and former chief, might be interested in grabbing the company. The notion that AOL is on the block is of course laden with irony: It was just three short years ago, at the height of the bubble, that indomitable-seeming AOL bought apparently ailing Time Warner.

Of course, the deal soon turned into a nightmare for everyone involved. Demand for AOL's subpar and irritating-to-use product sagged dramatically as Internet users became more discerning. In addition, Case's company was appallingly run and became the subject of federal investigations, still ongoing, into potential accounting irregularities. Time Warner managers reacted by wresting control from AOL honchos and even expunging AOL from the corporate name. Though the powers that be have put Jonathan Miller, a well-regarded manager, in charge of AOL, it would be no surprise if Time Warner sought to wash its hands entirely of the unit by selling it.

But at what price? While Time Warner obviously wants as much as it can get, first it must convince a buyer that AOL can resume growing and that it can keep reaping those rich cash flows. The price often bandied about is $10 billion -- which is far below the $170 billion market capitalization that AOL had when it announced its intention to buy Time Warner.

In this climate, where optimism about the tech sector is again riding high, it's all too possible that AOL could actually fetch $10 billion -- and perhaps a bit more. But in truth, the company may be worth no more than $6 billion. Even if we take the midpoint between $10 billion and $6 billion, we get $8 billion. There is no good reason for AOL to go for any more than that.

Cash-Flow Conflict

How do people arrive at the $10 billion figure? Though few reports have cited a rationale, there is a cash-flow-based calculation using AOL's much smaller rival EarthLink ( ELNK) that gets surprisingly close to $10 billion. However, another type of EarthLink comparison also gets us to $6 billion.

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