In a recent filing with the Securities and Exchange Commission, Google said the 5% AOL stake it bought in 2005 "may be impaired," which is accounting speak for "fast becoming worthless." According to this AP report in the Herald Tribune, Google is laying the groundwork for a potential future hit on earnings from the troubled investment.
In the filing, Google admitted: "There can be no assurance that impairment charges will not be required in the future, and any such amounts may be material." That's more financial speak for "the hit could be big." While Google's original investment in AOL came at a time when the company's market value hovered around $20 million, today analysts say AOL is probably worth less than $10 billion. Google declined to estimate the value of its stake, however.
While the AOL investment seemed like a good move at the time, as a bid to prevent AOL from hooking up with Microsoft in the online advertising business, it's now pretty clear that letting Microsoft have AOL might have been good for Google's books. Still, Google made $2.55 billion in the first half of this year, so any future charge against earnings due to the AOL investment probably won't make that big of a dent.
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