Microsoft and Time Warner are said to be exploring a variety of combinations of MSN and America Online, including a merger of the two into a new company.


According to several people involved in the talks, Microsoft and Time Warner have explored a variety of possible combinations of the MSN Internet portal with the America Online operation of Time Warner, including a merger of the two into a new company that would be jointly owned.

It is also rumoured that Microsoft offered to sell its MSN Internet portal and dial-up subscriber business both to America Online and to Yahoo. While Yahoo is said to have rejected the proposal, Time Warner, the parent of America Online, expressed interest.

Representatives of Time Warner, Microsoft and Yahoo have not commented on this.

The most elaborate proposal being discussed would involve creating the world’s largest Internet company, combining America Online with the MSN Internet portal and dial-up Internet business.

According to Nielsen/NetRatings, a combination of AOL and MSN would have 18 percent of the search market in the United States. Google tops with 46 percent and Yahoo is second with 23 percent.

However Google might be affected in terms of ad revenue. This year, 11 percent of Google’s revenue came from advertising it placed on AOL sites.

Michael Nathanson, an analyst with Sanford C. Bernstein, said a deal with Microsft would help Time Warner’s stock and “The deal will be trumpeted so much that the stock will go up”.

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