Bloomberg dropped a doozy of a scoop on Friday afternoon: AOL's chief executive Tim Armstrong wants to sell his company to Yahoo and then run the whole operation, "according to two people familiar with the matter." First of all, as we pointed out earlier, this happens all the time. Just last fall, AOL tried to talk Yahoo into the reverse merger idea twice before, once last year and once in 2008. In the words of Wired's Tim Carmody: "Each time, cooler heads strapped smelling salts around their necks, muttered 'wait, why are we doing this?' and walked away." That's sort of exactly what happened this time, the hat-trick goal in the AOL-Yahoo merger rumor game. At face value the deal is also ludicrous. Yahoo has ten times the market cap as AOL, and with both companies suffering, a merger would probably only make matters worse.
It took CNBC less than an hour to debunk the rumor from with a report that a "source close to Yahoo says no interest in AOL." That didn't stop AOL stock from sinking five percent in the wake of the chatter it produced, however. The chatter was pretty funny nevertheless.
Tim Armstrong is hardly a savior CEO says Erick Schonfeld at TechCrunch:
While a combination of AOL and Yahoo is always an option, with the main advantage being that it solves Yahoo's leadership search problem if Armstrong becomes the CEO, it is not a particularly good option. Two dogs don't make a right (at least in the eyes of Wall Street).
It's worth pointing out that AOL owns TechCrunch, so Schonfeld would presumably have an opinion. Of course, given the recent, very well-publicized three-way battle between Armstrong, Arianna Huffington and TechCrunch founder Michael Arrington might have skewed this opinion somewhat.