msnbc.com staff and news service reports
updated 11/7/2005 5:36:50 PM ET 2005-11-07T22:36:50

Microsoft Corp., the world's largest software maker, has emerged as the lead suitor for a stake in Time Warner Inc.'s Internet unit America Online, The New York Times reported Monday.

If Microsoft were to complete a deal, it would fold its MSN Internet service into a venture with AOL, the newspaper said. However, a source familiar with the talks said Time Warner is negotiating with multiple partners and no deal is imminent.

In addition to Microsoft, other suitors seeking a stake in AOL include Google Inc., Comcast Corp., Yahoo Inc. and News Corp. sources familiar with the situation have said. (MSNBC is a Microsoft-NBC joint venture.)

Time Warner is interested in selling a stake in AOL in part to boost its flatlining stock price, which has never recovered from the damage of the historic merger that created the media giant in 2001. The company's stock traded at over $50 a share shortly after the merger, compared with about $18 currently.

A deal combining the AOL and MSN portals would make the resulting site the most visited on the Internet, making it especially attractive to advertisers. Time Warner is in the midst of transforming AOL from a subscription-based business model to one more dependent on advertising.

In a conference call with analysts last week after Time Warner reported earnings, Chairman and Chief Executive Richard Parsons for the first time confirmed the company is in what he called "a series of exploratory discussions involving AOL with a number of potential strategic partners."

"The discussions cover a range of potential commercial and other strategic relationships and transactions," he said. "Because the discussions are fluid we don't know ... if they will result in any transaction or what form any transaction would take."

Microsoft Chairman Bill Gates told The New York Times in an interview last week that his interest in AOL was about playing a greater role in the future of advertising, the newspaper said.

One issue that has yet to be resolved in any deal is how the resulting venture would be governed. Time Warner does not want to cede control unless it receives a "very rich offer," the newspaper said.

Time Warner officials declined to comment on the latest reports. Microsoft officials could not immediately be reached.

Reuters contributed to this report.

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