14 DAY TRIAL // AOL is certainly not the giant it once was, but it's looking to reinvent itself and move forward in a market dominated by younger players. One possibility being analyzed is spinning off the legacy dial-up business and finding a way to merge with Yahoo, another stagnant, former giant of the web.
Rumors about AOL's plans have been around for a while now, partially because, the company has been thinking about it even before it spun off from Time Warner and became an independent entity.
Reuters served the latest batch, providing some new details about AOL's proposed strategy. It must be noted that the plans are by no means concrete or final, they are just an option the company is considering.
One big move would be getting rid of its dial-up business. While subscriber numbers are dwindling, it's still a major earner for AOL, contributing about 40 percent to the company's bottom line for 2010.
AOL still has some 4 million dial-up subscribers, but it's losing about 200,000 to 300,000 per quarter so that well is going to dry up and fast.
AOL is considering selling this part of its business, if it can find an interested party eager to pay the rather hefty sum it's bound to fetch.
The cash would then be used to better position AOL to take over Yahoo. Of course, AOL, at this point is still several times smaller than Yahoo and it doesn't have the financial strength to simply buy the company.
The most likely scenario would be AOL teaming up with private equity firms first to take over Yahoo and then break it up.
One of the most obvious moves would be selling Yahoo's valuable Asian properties, its stakes in the Chinese giant Alibaba and Yahoo Japan.
Those two stakes alone are said to keep Yahoo stock price and valuation at a much higher level which it would not be able to maintain based on its own properties.
After selling the Asian properties, AOL's advertising business would be merged with Yahoo's and both companies would focus on content, which is the current strategy at both Yahoo and AOL.
Of course, there is one big problem in all of this, Yahoo doesn't like the idea of a takeover one bit and it certainly doesn't want to let go of its Asian investments.