In a move that could deal a blow to MSNBC, Microsoft is in talks with Time Warner's America Online to join forces against the might of Yahoo! and Google.
The Redmond, Wash.-based software giant is negotiating a possible stake in AOL as part of a broader deal that would place Microsoft's search technology on AOL.com and tie up their ad sales networks.
Such a deal could give the two companies a big leg up in the increasingly competitive online media world. But it might also spell trouble for the ailing MSNBC.
The cable newsie is funded in part by Microsoft and linked to the software giant through its MSN portal, which provides much of the traffic to MSNBC.com.
If the Microsoft-AOL talks pan out, they could create a portal even bigger than Yahoo! with search provided by the tech giant, ending AOL's lucrative deal with Google.
MSN and AOL might then both get their news from Time Warner's CNN, ending MSNBC's contract with Microsoft that has kept it as the most popular news Web site, with 27 million visitors in August compared to CNN.com's 24 million.
Microsoft and NBC Universal were already looking for ways to unwind a partnership that both sides agree has been a financial failure.
NBC could certainly operate MSNBC without Microsoft, but pressure would increase to stem losses at the cabler, perhaps by combining MSNBC and CNBC, both based in New Jersey.
Microsoft's MSN and Google are the second and third most popular online portals behind Yahoo!, but Microsoft remains a distant third behind Yahoo! and Google in the booming field of search.
Search-related advertising is one of the main drivers of online media and would be at the heart of an AOL-Microsoft tie-up.
In the first half of this year alone, AOL generated $290.5 million for Google, or about 11% of the Netco's total revenue, while likely keeping about as much from the search-based ads for itself.
If it didn't renew its contract with Google and used Microsoft's search technology instead, AOL could likely keep a bigger cut of the revenues. Both companies would benefit significantly while dealing a blow to Google.
They would also get a big boost for their online portals by joining forces, especially as AOL focuses attention on AOL.com and away from its decaying Internet access business.
Talks are part of a thaw in the relationship between the world's largest media and software companies that began when Microsoft paid $750 million to settle an antitrust suit that accused the software maker of unfairly competing against AOL property Netscape.
Google raised more than $4 billion in a follow-on stock offering Wednesday, cash it says it will use for general corporate purposes and for acquisitions.
Google's shares fell slightly Thursday to close at $302.62.
News of the talks sent Time Warner shares up more than 3% to $18.50.
