Monday, December 26, 2005

AOL & Google Joint Venture

This week's announcement of Google's venture with Time Warner's AOL unit seems almost anticlimactic. The major news about the venture, I suppose, is that Microsoft lost out on the defensive move.

It seems to me that anything Google really needs accomplished will be done on its own, with full control. For some time now, the mating dance by Yahoo, Microsoft and Google around AOL was seen as mostly to keep the latter's customer base out of one of the others' grasp. Just in case it turns out to be useful for something.

Watching Dick Parsons juggle his succession lineup and attempt to fend off Carl Icahn in the midst of this venture is amusing, when it's not sad. I owned AOL at the time of its merger with Time Warner. Then, as now, I thought the latter's board did a profound disservice to its shareholders by accepting AOL's offer, and not spurning it. It is hard to believe that a marquee name investment bank would not have found adequate grounds to reject the offer, protect the board's exposure on the "fiduciary duty" basis, and provide sufficient doubt of the longer-term value of merging with a temporarily-highly valued suitor like AOL.

Perhaps, more than anything else, this deal demonstrated, once again, that "synergies" are rarely realized post-merger, and that simpler business structures are frequently more consistently superior in generating market-beating total returns for their owners.

I don't envy the managers at AOL. Being the "partner" of a celebrity company like Google, and nearly publicly disowned by its management, can hardly be an appealing career opportunity.