Why Doesn't Microsoft Buy Time Warner? AOL, Bebo, AIM and Harry Potter!
Yesterday, you could feel the testiness jump right over the phone from several people close to Microsoft whom I spoke to about Yahoo’s latest gambit to sell its blue-sky growth plan to Wall Street.
Like a lot of Yahoo’s various moves of late–dating promiscuously with other suitors, handing out pricey severance plans to all employees and continuing to spurn the advances of the software giant without a raise in its $31-a-share bid–the projections by Yahoo (YHOO) that its sunny future warranted at least $40 a share were not taken well in Redmond.
In fact, the company–although it may ultimately have to–is quite adamant about not raising the price. “Sooner or later, they’ll run out of things to do,” said one Microsoft (MSFT) exec.
Sooner would be better, as paying $40 a share would add about $12 billion more the the $41 billion price tag, which would make it one of the biggest tech mergers in history if consummated.
But for the same high, high price, why not take all that money and buy AOL and the giant media conglomerate attached to it?
Yes, I mean Time Warner! Home of AOL and Harry Potter!
This thought occurred to me as I watched the stock of Time Warner (TWX) drift further downward over the last weeks, even though it has tried to give itself a shot in the digital arm by paying $850 million in cash to buy the Bebo social network.
Current price tag for the whole ball of TWX: $51.5 billion. (Of course, debt brings the price up to about $85 billion to $87 billion, but this is just a fantasy, so indulge me.)
And for that you not only get the relatively decent AOL online ad network, you also get a social network in Bebo (No. 3, but Microsoft has only a tiny piece of Facebook), the powerful AIM instant messaging service, a just-as-famous brand name in need of some TLC, some nice Web properties and, best of all, a chance to shove out Google (GOOG) from its search-ad relationship with AOL (Google owns 5% of the unit, which it bought for $1 billion).
Plus, all kinds of stuff you can either keep or spin off: powerful cable assets, top-notch television and movie studios (those cool “Entourage” guys on HBO!), the biggest magazine company (People, Sports Illustrated!), cable networks (Anderson Cooper and Larry King on CNN) and much, much more.
Frankly, compared to Yahoo, Time Warner kind of feels like a bargain, and they know from getting taken over by digital types.
Years ago, as I reported in my book, “aol.com,” Microsoft Co-Founder and longtime leader Bill Gates once said to AOL Founder and then-CEO Steve Case in 1993: “I can buy 20% of you or I can buy all of you. Or I can go into this business myself and bury you.”
How ironic would it be if that promise finally came true?