Slice and Dice

AOL Mulls Breakup, Merger With Yahoo

Would sever its dial-up and ad businesses.

Does this mean no more free discs in the mail? AOL is thinking about breaking up its two main businesses, dial-up Internet service and display advertising, and merging the latter with Yahoo Inc. But first AOL has to find a buyer for its dial-up. In 2008 and 2009, before Time Warner split off, AOL had looked into selling its dial-up to Earthlink, but Earthlink’s cash is now tied-up in DeltaCom Inc. Yahoo, meanwhile, has to shrink before it can merge with AOL, most likely by selling off its Asia assets, which have grown so much in recent years that selling them will incur massive taxes. A source close to the deal described the tax issues as “the equivalent of throwing a basketball from underneath your own hoop. It is not going to happen.” The plan is still in the exploratory stage, and Yahoo has yet to be contacted.