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Ballmer Dances Around Microsoft-AOL Rumors
By Roy Mark

December 7, 2005

WASHINGTON — Microsoft CEO Steve Ballmer adamantly maintained a “no comment” stance Wednesday morning as swirling and contradictory media rumors of a possible Microsoft-AOL online advertising alliance followed Ballmer to Capitol Hill.

In a question-and-answer session with several hundred Washington-area technology executives, an effusive Ballmer laughed, danced and ducked any question involving AOL.

“I have no comment on an AOL deal . . . or a no deal,” Ballmer said.

Reuters reported Wednesday that Google (Quote) and Microsoft (Quote) are still actively battling to close a deal with Time Warner’s AOL.

That report contradicted a Tuesday story in The Wall Street Journal that said the deal was tipping Microsoft’s way. Wednesday morning, the paper modified its story to indicate Google could still emerge a winner over Microsoft for a search engine advertising deal with AOL.

“I guess you’ll have to keep reading [the papers],” Ballmer laughed.

AOL currently uses Google’s search engine and the two companies share search-generated ad revenue. Microsoft, currently No. 3 in the search engine wars behind Yahoo (Quote) and Google, is anxious to convince AOL to use its search engine.

Google currently realizes approximately 11 percent of its advertising revenue through its deal with AOL.

According to The Wall Street Journal, Microsoft wants to create a joint venture with AOL to sell online advertising through both AOL’s portal and Microsoft’s MSN.

Using October Web traffic numbers, comScore Media Metrix, an online market-research firm, estimates a combined AOL-MSN would have reached 140 million unique visitors, ranking it first ahead of Yahoo (122 million) and Google (86 million).

Microsoft originally proposed to buy a stake in AOL with an eye toward creating the world’s largest Internet company. That proposal has faded as Time Warner courts competing offers that leave AOL in the media conglomerate’s control.

AOL was virtually synonymous with the Internet boom of the 1990s, signing up millions for dial-up access to e-mail and the Web. By 2000, speculation over AOL reached its highest frenzy with Time Warner putting together a $350 billion deal to merge with AOL.

The deal, however, quickly soured amid Securities and Exchange Commission and Department of Justice inquiries over possible accounting improprieties underpinning the merger. Stockholder suits followed.

AOL has also struggled to hang on to its dial-up customers in the face of competition from high-speed broadband providers.

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