Yow. Though I have no idea if, honestly, anyone is listening to Icahn, it’s still quite a quote. From the SF Chronicle:
In a letter to the board Monday, Icahn told directors they “may be on the verge of making a disastrous decision.” Any agreement with Google that precludes a future merger or transaction with another company would be a breach of their duty, he said.
I would not be surprised to see history conclude that this was one of the worst deals for both companies.
Gates has done a fantastic job of baiting Google into a very, very bad decision. Google officially looses it ethics and Google looses a ton of cash to preserve a tiny bit of revenue.
Worth it? I doubt it.
yeah but great deal for twx…
I’m not saying that Carl Icahn is either or right or wrong, but his track record would not indicate that he has AOL’s best interest at heart… I would definitely discount the value of a notorious green-mailer’s opinion.
Don’t believe what you read in the papers about this deal, especially the NYT. There is going to be absolutely NO preferred placement of any AOL advertising or algorythmic results. Behind the scenes Google is flipping about this being the impression. AOL is merely going to get Adwords credits and they are going to explore graphic advertising on some of Google’s ancillary sites. Nothing definite, just explore.
As for the economics of the deal, it is practically a no brainer. Google is spending $1b in cash that they were making about $20m in after-tax cash from for about $50m in after-tax search revenue from AOL($80m net of TAC less 35% in taxes). Plus, the AOL revenue will be growing, as well as the value of their 5% stake while the $1b in cash would probably have just sat there earning 3% pre-tax.
Strategically the deal keeps MSN from gaining more than their current paltry scale in paid search.
For AOL the deal has too many advantages to list but will become evident over time. I am just baffled why anyone would think this is a bad deal for either company – except for the unfortunate PR due to extremely sloppy reporting.
Great comment, wireless. As long as no special Maximizer dog team is going to show up at AOL and sprinkle bonus pixie dust to juice their unpaid results, I think you’ve nailed it. The deal makes a lot of sense.
– Stuart
Heh. Icahn is blowing smoke. The odds of this deal being found a breach of the TW’s Board’s fiduciary duties are somewhere between 0% and my ass. If the TW Board could approve that AOL merger in the first place without being found legally responsible, this deal falls way short of the mark.
no one cares about integrity in business. the whole do no evil thing was a facade. no on cares what the geeks think and, despite all the whining on blogs, it will not effect their business.