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Last Updated: Monday, 19 December 2005, 10:49 GMT
Google 'close to $1bn AOL deal'
Workers at Google's US headquarters
AOL is Google's biggest customer
Google is expected to announce later this week that it will pay $1bn (565m) for a 5% stake in America Online.

The planned deal, which follows intense negotiations between the two US internet giants, would value Time Warner's troubled AOL unit at $20bn.

Under the proposed deal, Google would highlight AOL's services as sponsored links on its web pages.

Internet search giant Google is keen to prevent US rival Microsoft from gaining a foothold in AOL.

Biggest customer

Newspaper reports earlier this month suggested that Microsoft was considering buying a stake in AOL, with a view to integrating its own internet service into the company.

A deal between Google and AOL would demonstrate that Google is prepared to pay heavily to prevent Microsoft from becoming a bigger player in the lucrative internet search sector.

The two companies could reach agreement later this week when the board of Time Warner meets in New York, Reuters reported.

It is understood that AOL would continue to steer its subscribers to Google's search engine as part of any deal.

AOL is currently Google's biggest customer. During the first nine months of the year it accounted for about $429m, or 10%, of Google's revenue.

Share slump

Time Warner has been seeking a partner to boost AOL's value, which would in turn lift the US media giant's shares.

The company has seen its share price plunge since its takeover of AOL in 2000 - sinking from highs above $85 to around $18 currently.

AOL founder Steve Case last week backed calls for AOL to be split from Time Warner.

Yahoo had also been in talks with Time Warner but dropped out in November, reportedly because the media giant wanted to retain a majority stake in AOL.

Shares in Google surged more than 7% to highs of $435.15 at the close of trade on the US Nasdaq exchange on Friday.


SEE ALSO:
Google 'in exclusive AOL talks'
16 Dec 05 |  Business
Case calls for Time Warner split
12 Dec 05 |  Business
Yahoo out of talks on AOL stake
10 Nov 05 |  Business
Microsoft 'set to take AOL stake'
07 Nov 05 |  Business
Time Warner sees 80% profit rise
02 Nov 05 |  Business
Time Warner keeps faith with AOL
21 Sep 05 |  Business


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