17
Jun
10

AOL sells Bebo for scrap – and a $275 million tax break

NEWS
AOL sells Bebo for scrap – and a $275 million tax break

Thursday, June 17, 2010

••• AOL Inc is paring back its ambitions in online social networking, selling a website called Bebo that it bought a little more than two years ago for $.850 million. when AOL was still part of Time Warner Inc.
Bebo, which was launched in 2005, has failed to match the huge popularity of sites such as Facebook and Twitter.

It has been strong in foreign markets, though, including Britain.

AOL tried to take advantage of that to drive traffic to its other ad-supported web properties, but the site has been losing ground.

Worldwide, it had about 12.6 million users in April, less than half of the 26.9 million it had in the same month a year ago, according to comScore Inc.

In the U.S., Bebo was down to 4.9 million from 10.2 million a year earlier. In the same period, Facebook has grown to 121.8 million users in the US from 67.5 million.

AOL said in April it planned to shut Bebo or sell it. The company said on Wednesday the buyer is the private investment firm, Criterion Capital Partners LLC.

The California firm did not say how much it is paying, but analysts have speculated that the site would fetch just a small fraction of what AOL paid for it. In a note AOL CEO Tim Armstrong sent to employees on Thursday, he said the deal provides a ‘meaningful’ tax deduction for AOL.

AOL said in a filing with the U.S. Securities and Exchange Commission it expects to log a tax benefit of $275 million to $325 million in the April-June quarter. The company also said it will assess whether it needs to write down the value of its business overall for the quarter.

In his note, Armstrong also said the sale would let Bebo users continue to use the service.

Criterion Capital Partners are specialists in facilitating growth plans and turnarounds and are well-placed to drive Bebo’s effort to strengthen its foothold within the highly competitive social networking arena,’ he wrote.

In April, AOL unloaded another service that it had acquired for more money. It agreed to sell its ICQ instant messaging business for $187.5 million in cash to Russian internet investor Digital Sky Technologies. In 1998, AOL, then known as America Online, paid at least $US287 million to buy Mirabilis, the Israeli company behind ICQ.

AOL shares fell 8 cents to $22.20 in afternoon trading.
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