On Friday Google said its 5% stake in Time Warner’s AOL unit may be worth less than the $1 billion they paid for it in 2006.
“We believe our investment in AOL may be impaired,” Google said in its latest quarterly financial filing with the U.S. Securities and Exchange Commission.
Google said it would continue to review its investment for impairment, and financial write-downs could be required in the future.
In a deal announced in December 2005 and which closed the following year, Google paid $1 billion in cash for a 5 percent indirect equity stake in AOL.
The deal by the Mountain View, California-based company gave AOL a theoretical valuation of $20 billion at the time.
In return, Google got a guaranteed renewal of its search advertising deal with AOL.
A big part of the reason they made that investment in AOL was to prevent AOL from doing an ad deal with MSFT or Yahoo at that time. It was more a strategic move than an investment per se. So yes they may have lost some on their investment on paper but they gained a strategic advantage so I won’t feel too bad for Googs.
Great info – the respons posted by Tony is straight to the point – sometimes you have to lose on one side (money or something else) to gain on the other (money or competative advantage).