Market Overview

Trade The AOL / Huffington Post Merger (AOL, MSFT, YHOO, GOOG)

As Benzinga readers already know, in an attempt to revamp the company, AOL (NYSE: AOL) will purchase The Huffington Post for $315 million.

In 2010, AOL suffered a 26% hit to revenues, a result of declining dial-up subscriptions and drops in advertising sales. AOL hopes that the Huffington Post, a growing news website, can help with these declines and even become mutually beneficial: the Huffington Post can become a news and media giant using AOL's resources, and in return, AOL receives a hip new makeover.

AOL has failed to keep pace with other internet and online advertising websites. Competitors such as Microsoft (NASDAQ: MSFT), Yahoo (NASDAQ: YHOO), and Google (NASDAQ: GOOG) have taken over the internet. Google holds the top spot with advertising sales.

The new objective for AOL is to become a media and entertainment powerhouse, according to Reuters. Perhaps a move away from revenues dependent on dial-up internet subscriptions will allow for a more profitable future for both AOL and the Huffington Post.

As of September 2010, AOL's cash balance almost doubled from the previous quarter; an indication that the company was planning a big move such as this. Glancing at AOL's financials, while revenues are dwarfed by competitors, assets cover liabilities three times over, indicating a strong financial position despite setbacks in revenues.

Investors may consider a long position in AOL as it attempts to adapt to industry expectations. With strong financials and a clear plan for moving forward, it may be a great entry point for investors confident in the arrangement.

Neither Benzinga nor its staff recommends that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

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