We kid you not, some top investors and industry watchers are suggesting that Yahoo and AOL -- which has mixed experience with mega-mergers -- should combine immediately.
"Big investors" want Yahoo and AOL to merge, AOL CEO Tim Armstrong to become CEO of the combined company, and Yahoo CEO Carol Bartz to become Chairman, according to BoomTown's Kara Swisher.
"Armstrong," sources tell Swisher, "has not shied away from the idea."
Certainly, the imminent departure of Yahoo's U.S. head Hilary Schneider, -- along with two other top execs -- a stagnant stock price, and weak growth are creating pressure on CEO Carol Bartz (and Yahoo's board) to do something dramatic.
Under the headline, "Game over, Carol Bartz," Fortune writes: "Yahoo's stock price is abysmal, employee morale is low, and top-level executives are fleeing. What's left? An Internet property slowly limping to its death and a mouthy CEO with no vision. [Bartz's] days are numbered."
"It's ridiculous that they haven't already," Business Insider's Henry Blodget says of the would-be merger.
"Yahoo and AOL are both in the same business, and it is a business that benefits greatly from scale. Yahoo and AOL are both basically media companies. They both use technology extensively, but their core competency is producing content to attract an audience and then selling display ads against that audience."
Adds Blodget, "They also both operate duplicative mail, instant-messaging, sports, finance, news, maps, and other services, all of which currently compete with each other. That is senseless. By combining, Yahoo and AOL would achieve greater scale and reduce duplication."
And Swisher notes, however, New Corp. could potentially give Yahoo some competition if it were to go after AOL. "The reason is that its own digital efforts, especially at the MySpace social networking site, have gone sideways," she writes.
"And there's history: News Corp. tried to facilitate a merger of MySpace, MSN and Yahoo into a company codenamed 'TrafficCo' at the time Microsoft was attempting a takeover of Yahoo."
Meanwhile, "AOL is affordable, even for Yahoo," according to Blodget. "AOL's enterprise value is about $2.4 billion. Yahoo's is $16 billion. Yahoo could probably get AOL for $3 billion, maybe $3.5 billion. That's only 20% dilution."
By Gavin O'Malley
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