Google fears AOL financial blow

Posted by admin on 10 August, 2008 under Business news | Be the First to Comment

Google has acknowledged that its stake in rival internet firm AOL may now be worth less than the $1bn (£519m) that it paid for it two years ago.

In a statement to market regulators, Google said the value of its 5% investment may be “impaired”, meaning its worth could have diminished.

Google took the stake largely to cement an advertising partnership with AOL.

But AOL has struggled in recent years and owner Time Warner has indicated it could sell the business.

Financial strength

Time Warner recently took steps to separate the access and content functions of AOL, seen by analysts as a prelude to a sale of both operations.

Both Microsoft and Yahoo are seen as possible buyers of AOL’s content arm as they strive to compete more effectively with Google.

Google’s statement represents its first public acknowledgement that its holding in AOL may be a financial drain on its own business.

“We believe our investment in AOL may be impaired,” its statement to the Securities and Exchange Commission noted.

“There can be no assurance that impairment charges will not be required in the future and any such amounts may be material.”

Google did not say how much it thought its AOL stake was now worth.

Although unfortunate, AOL’s declining value is unlikely to prove a major problem for Google given its enormous financial strength.

The firm made a $2.5bn profit in the first six months of the year and currently has cash reserves of more than $12.5bn.

News reported by The BBC