Google Inc., the most-used Internet search engine, may consider making a bid for America Online to keep the company from switching to Microsoft Corp.’s search technology, a Merrill Lynch & Co. analyst said.
America Online, the world’s biggest Internet access provider, may replace Mountain View, California-based Google’s search engine with a product from Microsoft, a person familiar with the matter said yesterday. Microsoft also is considering taking a stake in America Online, a unit of Time Warner Inc., the person said.
Google, which receives 12 percent of its sales from online advertising and other fees generated by America Online, may make a bid to protect that revenue, Merrill’s Lauren Rich Fine wrote in a note to clients today. Losing AOL as a client may potentially cut Google’s earnings per share by 5 percent to 10 percent, she said.
“This would certainly protect Google’s revenues from AOL,” Fine wrote in the report. She rates Google shares “neutral.” A tie- up between Google and AOL may also enable Google to gain a significant amount of content, she said.
Shares of Google, which have risen 56 percent this year, fell 60 cents to $300.81 at 11:22 a.m. in Nasdaq Stock Market composite trading. Stock in Redmond, Washington-based Microsoft fell 18 cents to $26.09 and Yahoo shares fell 19 cents to $33.38.
A Microsoft-AOL combination would bolster both companies’ user counts and range of Web content, heightening competition for Google and Yahoo! Inc., Fine said. Yahoo, based in Sunnyvale, California, is the most-visited Web site.
Google spokesman Steve Langdon didn’t immediately return a call seeking comment. Merrill Lynch spokeswoman Carrie Gray said Fine wasn’t available to comment on the report.
Goldman Sachs Group Inc. analyst Anthony Noto estimates America Online contributed 4 percent to 7 percent of Google’s earnings per share in the first half of 2005. New York-based Noto, who rates Google shares “outperform,” said in a report today that AOL’s contribution to Google’s profits is declining every quarter.
