AOL to write-off $850 million Bebo acquisition

by Scott Bicheno on 18 June 2010, 10:56

Tags: AOL (NYSE:AOL)

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Taxing times

Internet giant AOL's calamitous decade has culminated in the sale of social networking site Bebo to private equity outfit Criterion Capital Partners for a figure reported to be under $10 million. AOL paid $850 million when it bought Bebo two years ago.

Now AOL isn't the only company to bet heavily on social networking. Rupert Murdoch's News Corp showed it was aware of the importance of this trend when it paid $580 million for MySpace, which was at the time the dominant social networking site. It has struggled to maintain its position, however, amid the growing ubiquity of Facebook and, as reported by TechCrunch continues to suffer further turmoil among its leadership.

But nobody screws up on quite the scale of AOL. Having undertaken the defining merger of the dotcom era - with Time Warner, leaving both companies crippled, and which was reversed last year - it is effectively writing-off the entire value of the purchase of Bebo, a mee two years after buying it.

Incidentally the former boss of AOL - Steve Case - who was key to the Time Warner merger, has had the gall to gloat over the failure of the Bebo acquisition via Twitter.

TechCrunch was once more on top of the matter, anticipating the deal two days ago and explaining why it's actually better for AOL to almost give Bebo away, rather than try to get more for it. Now AOL can treat Bebo as ‘worthless' for income tax purposes, and write-off the purchase. This will enable AOL to save around $300 million in income tax in Q2.

So, a large company has undertaken a rash and ill-informed risk and now the tax-payer is being required to share its financial pain. Sound familiar?

 



HEXUS Forums :: 4 Comments

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Perhaps the money saved from not producing those dreaded AOL discs has saved them here.

It does amaze me that AOL are still going. They somehow have more money than sense it would seem.
AGTDenton
Perhaps the money saved from not producing those dreaded AOL discs has saved them here.

It does amaze me that AOL are still going. They somehow have more money than sense it would seem.

I think AOLs days are numbered in this world. Once the all singing power of ISP's, I remember when it was pretty much them and Compuserve in the UK back in the early 90's.

AOL has failed to move with the times and keep up with what the consumer wants and can get else where.
Damn I remember AOL, that horrible blue browser you needed to start up first.
AGTDenton
Perhaps the money saved from not producing those dreaded AOL discs has saved them here.

It does amaze me that AOL are still going. They somehow have more money than sense it would seem.

My guess is that the Time Warner merger helped a lot - since that's now been reversed, we might see it start to gradually fade away.