More fuel for those inside and outside of AOL who thought the company paid way to much for Bebo: A precise accounting of just what Time Warner’s Web unit got when it plunked down $857 million for the social network earlier this year.
Per TWX’s most recent SEC filing, the company is booking almost all of the purchase price — $760 million — as goodwill. Another $86 million went to “specific amortizable intangible assets.” That is: Beyond $11 million in actual stuff — servers, Aeron chairs, etc — there’s almost no there there.
Quick accounting refresher: Goodwill basically represents the premium a buyer is paying for a company over and above the book value of its physical asssets. When you buy an Internet company, there’s very little in the way of physical assets, so assigning most of the value to goodwill is standard.
The problem comes when the acquirer later has to go back and tell investors, via a writedown, that it paid way, way too much — as Time Warner itself famously had to do with AOL in 2003. And now that Time Warner has declared that it spent $846 million on something it can’t really define, that’s a fat target for Bebo sceptics.
Then again, Bebo execs themselves haven’t made much of an effort to justify the valuation to begin with. Here’s co-founder Michael Birch in April, shortly after the deal was announced:
An exasperated questioner made one last effort to get a straight answer out of Michael: Why did AOL pay $850 million for Bebo, anyway? ” “Eight hundred million,” Michael says, “was for Fiji.”
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