They’re back! A Bloomberg report is reigniting rumors of a possible merger of AOL (NYSE: AOL) and Yahoo! (Nasdaq: YHOO) in the wake of Carol Bartz's profanity-laden exit.
Good riddance to Bartz, who could barely even describe Yahoo!'s business. Recently, she haphazardly described Yahoo! as a "technical company, innovative, largest media content communications company in the world … content communications, media, technology, innovation … that's Yahoo!" I couldn't have described the company more eloquently myself.
If you're in the mood for a stroll down memory lane, a brief visit here and here should satisfy your nostalgia. The newest report claims that AOL CEO Tim Armstrong is in discussions with advisors to Yahoo! to "gauge its interest in combining the companies." The alleged proposal now would involve Yahoo! acquiring AOL and for Armstrong to lead the new monstrosity.
This latest buzz will probably be whisked away just as quickly as the boy who cried "wolf." It starts to lose its effect after so many iterations. Besides, why would you want a guy who's delivering nothing but dismal results leading a joined company whose market cap would be more than 10 times what he's used to?
Neither company's problems can be solved overnight with a merger. The online advertising landscape has evolved, and both companies have failed to stay current against the likes of Facebook and Google (Nasdaq: GOOG). Getting bigger won't suddenly render those two behemoths irrelevant. Nowadays, advertising dollars go to those who can point to relevant content, rather than those who can create it. This is precisely where Google excels and Yahoo! does not.
Granted, any merger would result in some cost-saving synergies, but those savings pale in comparison with each company's respective revenue declines. Yahoo!'s most recent quarterly revenue fell $372.4 million from the previous year while AOL's fell by "only" $50 million.
Move along -- there's nothing to see here. This speculation will fade faster each time it rears its dubious head. Just don't be surprised if it comes back to visit us in another nine to 12 months.
