While it still would present some integration challenges, AOL might be easier for Microsoft to absorb than Yahoo from a cultural and political perspective now that Microsoft's battle for Yahoo has gotten so ugly.

Though Yahoo's search business is the crown jewel Microsoft has been after, the quest to acquire it has degenerated into a string of taunts, threats, and mudslinging for which there seems little chance of an amicable ending. This could pose some serious cultural and integration problems if the companies ever do merge, analysts said.

Purchasing AOL -- a smaller business that would still give Microsoft a host of popular online properties to bolster its advertising business -- could save Microsoft integration grief and the hassles of dragging out negotiations with Yahoo while Google continues to take market share from both companies. It would also be less expensive and wouldn't preclude Microsoft from also buying Yahoo's search business at a later date, analysts said.

Posted: Jul 18, 2008 11:35 am