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Last Updated: Wednesday, 21 December 2005, 07:50 GMT
Google confirms $1bn stake in AOL
Workers at Google's US headquarters
AOL is Google's biggest customer
Online search engine Google has confirmed it will invest $1bn to take a 5% stake in Time Warner's AOL unit as part of a major strategic alliance.

The deal, which follows intense negotiations between the two US internet giants, values the troubled AOL unit at $20bn.

The global online advertising partnership will make more of AOL's content available to Google users.

The agreement shuts out software giant Microsoft from a rumoured AOL tie-up.

"We're very pleased to build significantly on our special relationship with Google," said Time Warner chief executive Dick Parsons.

Microsoft threat

Microsoft was also said to have been considering buying a stake in AOL, with a view to integrating its own internet service into the company.

The tie-up between Google and AOL demonstrates Google is prepared to pay heavily to prevent Microsoft from becoming a bigger player in the lucrative internet search sector.

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.

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 about $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.

Google 'close to $1bn AOL deal'
19 Dec 05 |  Business
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

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