Talks For AOL Partnership Heat Up

Reports indicate that talks between Time Warner (TWX) and several technology industry giants regarding an online partnership with America Online have heated up in recent days. Some are speculating that a deal could value the entire AOL division at $20 billion. So what does TWX stock do yesterday on this news? It drops 2%, which can be attributed in part to the news that Yahoo and Microsoft are linking accessibility to their instant message programs.

Time Warner itself is valued at slightly more than $80 billion, with the AOL subsidiary widely considered dead as far as online innovation is concerned. And yet, reports of a deal are indicating that AOL might be worth 25% of Time Warner’s total valuation. If true, TWX’s current share price hardly makes sense to me. At $17, TWX repreesnts a wonderful value in a market that has been, to borrow a Jim Cramer term, a “house of pain.” If investors are looking for good deals with limited downside, Time Warner shares looks like a solid bet.