AOL Weighs Breakup, Yahoo Merger

As AOL shifts to focus on content, the Internet firm is considering breaking off its dial-up Internet service arm and then merging with Yahoo, insiders tell Reuters. Yahoo hasn’t been contacted about the plan, which echoes a move Time Warner considered in 2008 and 2009 before spinning off AOL. That plan could have seen AOL sell its dial-up service to EarthLink and merge its display advertising arm with Yahoo.

But to follow through on the plan now may be complicated: EarthLink is currently involved in another major transaction, buying DeltaCom, Inc. for $516 million, and may not be game for another big move. But a merger could make sense, says an analyst, since Yahoo is popular for email, general news, sports, and finance, while AOL is a good source of showbiz news and maps. Were Yahoo to support AOL's display ad business, it might give the company the financial peace of mind it needs to dump the dial-up division.
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