Google calls in chips in AOL investment

Google is calling in its chips in its $1 billion investment in Time Warner's AOL.

The search giant, which struck the hefty deal back in 2005, gave it a 5 percent stake in AOL.

The 2005 arrangement, not only included collaboration on advertising, instant messaging and video, but also gave Google "certain customary minority shareholder rights," such as those related to any future sale or public offering of AOL.

With the markets in the doldrums and AOL's business continuing to take a beating, as evidenced in Time Warner's fourth-quarter earnings report Wednesday, Google is looking for payback time.

Last summer, Google announced it was considering writing down some of the value it had previously placed on its AOL investment. And when Google reported its fourth-quarter results late last month, the write-down figure came in at $726 million.

And last week, things apparently between the two companies seemed to get worse when Time Warner Chief Financial Officer John Martin said 28 minutes and 13 seconds into the company's fourth-quarter Webcast conference call:

At the end of last week, Google sent us a request to exercise their demand registration rights that it has for its 5 percent ownership stake in AOL.

We're reviewing what we received and we're evaluating our options. Those options include: preceding with the request, delaying the decision for sometime, or we can move ahead to potentially buy back Google's stake at an appraised value, which would obviously be well below the value that was placed on at the time of the original investment.

In other words, stay tuned for more to come...

[mrorie]

What are "demand registration rights"?

[abcd9009]

demand registration rights - A contract that entitles a shareholder to force a company to delay the sale of his/her share to the public. <br /><br />Basically Google doesn't want to sell it's shares at a lose.

[Orion Blastar]

Honestly with the debt to equity ratio that AOL has, this is not surprising to me.<br /><br />AOL took on a lot of debt with Time Warner, and like many other companies had a problem with paying off that debt.<br /><br />Before someone seriously considers investing in a company they need to look at their accounting books and the debt to equity ratio. If it is too high, you know you are in for a downer if you invest. Eventually the bits will hit the fan. Yes I used a technical word for a vulgar one to avoid censorship. People know what I mean.<br /><br />I've been talking about AOL for ten years now and how it will eventually fail or file for reorganization unless it can settle the debt problems. Poor customer service is a part of it, AOL's dial-up pricing is way too high, and even what they do charge is not enough to cover their debts and expenses. AOL is a digital trainwreck just waiting to happen. Even if someone buys them out, they still have to deal with the debt problem.<br /><br />Google should consider exchanging that 5% ownership in AOL in exchange for surplus equipment so they can turn some AOL servers not being used that much into Google servers. I really doubt AOL can compensate Google for their loss. Heck in 1998 I had $50,000 in my 401K now I am down to $10,000 in an IRA as I no longer have a job. Some of that stock was in technology companies like AOL, so where is my $40,000? Better yet every single American citizen that lost 401K or IRA values, needs some compensation as well. We can't very well retire on empty promises and broken dreams, and the federal government is in such debt that it cannot even bail at least some of us out. Things are tough all over, not just for AOL and Google, but everyone.<br /><br />Last I checked stock did not have a guarantee, there was something called "risk" and "risk assessments" that one needs to know before investing in a stock. You could even lose everything you invested just as well as double your money depending on how bad or well a company does and how much debt it owes.<br /><br />Google, I am sorry you invested in a Turkey Company like AOL that did not pay off, many of us made the same mistake. This is not grade school kickball, there are no "do overs", it is called the stock market and you happened to have picked a losing stock. Deal with it, the rest of us have.

[TV James]

If someone from Google wants to call me, I'll give them $25. (Not per share, of course.)

[Seaspray0]

Does AOL's new CEO know how to fix a leaky toilet?

[idfubar]

They should spend another $1,000,000 and just take a controlling stake (or $2,000,000 and buy the whole thing outright)...