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Report: Time Warner and Microsoft Rethink Alliance - InternetNews.
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Report: Time Warner and Microsoft Rethink Alliance

Media conglomerate Time Warner and software maker Microsoft are once again exploring the possibility of merging the MSN Internet portal with the America Online unit of Time Warner, according to The Wall Street Journal.

Microsoft, which is said to have initiated the talks earlier this year, is reportedly interested in buying a big stake of the struggling online business, possibly leaving the two companies equal partners in a venture that would make for the world's largest Internet company.

A Microsoft spokesperson declined to comment today. Time Warner representatives were not immediately available for comment.

The companies are reportedly discussing numerous possibilities, including combining their respective Internet search businesses, instant messaging and online advertising.

However, the talks stalled in the late summer over a range of issues, including technical obstacles and questions about control, according to the Journal, which cited people familiar with the talks.

The move would likely allow the software giant to focus its Internet operations on developing Web search products, rather than its Web portal and Internet access business, analysts say.

One source told the Journal if a deal is not reached this year, it probably will not happen. Time Warner is also having conversations with other companies interested in partnering with AOL, the Journal reported.

The potential alliance between the two companies could have significant ramifications to the industry, and more specifically provide a new challenge to Google and Yahoo, both of which could see their lead in search technology and online advertising shrink.

Currently Google provides Web search on AOL's services, and 11 percent of Google's revenue came from advertising on AOL sites. It is more than likely Microsoft would not renew those contracts once they expire.