Bloomberg is reporting that AOL CEO Tim Armstrong is in preliminary talks with Yahoo officials "to gauge its interest in combining the companies," according to two anonymous sources.
This comes during a week in which both companies had their fair share of controversies: Yahoo, with the embarrassing public ousting of former CEO Carol Bartz, and AOL/Huffington Post with their own messy breakup from TechCrunch founder Michael Arrington.
"Armstrong had been interested in a merger with Yahoo last year and was rebuffed while Bartz was at the helm, one person said. Her departure prompted him to reconsider the option, and, under one scenario now being considered, Yahoo would acquire AOL and Armstrong would become CEO of the combined company, the person said.
Yahoo is unlikely to be interested in a deal for AOL at this time given the company's losses and declining revenue, according to one person familiar with the matter. AOL's market value is about $1.6 billion, while Yahoo's is about $18.2 billion."
The question now is: would a merger make sense? The two companies have struggled to compete against Google and have shifted their appropriate strategies (Yahoo formerly search, AOL formerly connectivity) to focus on content.
Obviously, with AOL's $315 million acquisition of The Huffington Post and Yahoo's long list of blogs there'd be inevitable cannibalization. Though both companies have different types of assets to offer one another, it's unclear what their strategy would be going forward.
Earlier this year, a private equity firm moved to acquire both AOL and Yahoo and combine them under the same roof, though Reuters reports the deal eventually fell through.
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