Yahoo-AOL marriage would be rocky

AOL’s stock has soared recently, partly on rumors that it might merge with Yahoo. Though the two similar companies would seem to make a good marriage, their combined struggles could mean an AOL-Yahoo merger wouldn’t be a match made in heaven.

Neither company has suggested a deal is in the works. But there has been a lot of chatter about it — mostly from a Toronto-based hedge fund manager with stakes in both firms.

“There’s no question in my mind,” said the fund manager, Ironfire Capital’s Eric Jackson. “These companies are going to merge.”

AOL (AOL) is up 5% over the past week — though some of that is also due to the company selling its majority share in the money-losing local news site Patch.

Yahoo (YHOO, Fortune 500) and AOL do seem like a good pair: Both are in the same business of selling online ads pegged to news or entertainment content. A new, combined company could reduce costs by cutting staff, since one advertising team could sell the content of both companies, said Jackson.

AOL owns some potentially lucrative media brands, including the Huffington Post, TechCrunch and Engadget. And after Yahoo’s Editor-in-Chief Jai Singh stepped down last week, AOL content chief Arianna Huffington would seem to have an office ready for her at Yahoo.

Yahoo CEO Marissa Mayer is under pressure to grow the company’s core advertising business. Though Yahoo’s stock has soared lately, that has more to do with Yahoo’s stake in some lucrative Asian assets than the performance of its ad sales, which is sluggish.

“It would be a way of saying ‘we are growing,'” said Jackson, who believes Yahoo could buy AOL tax-free by using the proceeds from a sale of Yahoo Japan. “I think it will be too tempting to pass up.”Read More…

Source : CNN

Posted in Tech News

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