AOL in talks with Yahoo about possible merger, report says

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AOL Inc. is discussing a possible deal with Yahoo Inc. to combine the two companies following the ouster of former Yahoo Chief Executive Carol Bartz, a report says.

Tim Armstrong, AOL’s chief executive, is talking to Yahoo advisors from private equity firms and investment banks about possible options for a merger, Bloomberg News reported, citing two people familiar with the matter.

Armstrong had been interested in a merger with Yahoo last year, when Bartz was still CEO, but was ultimately rebuffed by the company, Bloomberg said. He is now reconsidering the possibility as a way to bolster both tech companies, the report said. One option includes Yahoo acquiring AOL, with Armstrong at the helm of the combined company as chief executive.

But Bloomberg cited one person who said Yahoo is unlikely to be interested at this time in a deal with AOL, considering the company’s declining revenue and heavy losses. Yahoo’s market value, at about $18.2 billion, is more than 11 times than that of AOL’s at $1.6 billion.

Yahoo and AOL have been losing revenue as the Internet evolved and competitors such as Google Inc. and Facebook Inc. took advertising dollars away.

Yahoo, once a leader in the online advertising world, rejected a $47.5-billion takeover offer from Microsoft Corp. in 2008. Bartz was hired afterward and then abruptly fired this week after years of declining revenue growth. Internet pioneer AOL has also struggled, losing almost $800 million since it was spun off from Time Warner Inc. in 2009.

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-- Shan Li