Last week at the Sun Valley conference AOL CEO Tim Armstrong was spotted at the bar late into the night with Yahoo CEO Marissa Mayer.
This prompted speculation that the two were going to merge their companies. Kara Swisher at Re/code did some reporting around the possibility and here’s what she’s hearing.
Armstrong would love to sell AOL to Yahoo. He has never directly pitched Yahoo on selling, but he has mentioned it in “side ways,” says Swisher. He thinks the two companies are really similar, so it makes sense to combine them.
At both Yahoo and AOL, this isn’t seen as a terrible idea. There is overlap, between the two, and Armstrong would give Mayer a good executive. AOL has some ad tech that would help Yahoo. It has cash flow from the dial-up business. And it has Huffington Post plus other solid media brands like Engadget and TechCrunch.
However, Swisher says Mayer thinks the deal is “small, unexciting, uninspiring and backward-looking.” She has told multiple people she doesn’t “get” it.
She’s probably right. AOL’s market cap is $US3.2 billion. Yahoo’s is about $US36 billion. So, Yahoo would have to pay a premium ($4 billion?) to buy AOL.
Does anyone really think that a combined AOL-Yahoo is going to produce an exciting new future? There would be cost savings and there might be some overlap, but are they really chasing the future of technology?
It would be expensive at $US4 billion. If Mayer wants to set Yahoo on road to innovation, there has to be a better way to spend the money.