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Google acknowledged late Thursday that it may have made a bad bet on AOL.
The search giant said in a filing with the Securities and Exchange Commission that its $1 billion investment for a 5 percent stake in Time Warner's Web unit "may be impaired" and that it may have to take a charge in the future:
Based on our review, we believe our investment in AOL may be impaired...We will continue to review this investment for impairment in the future. There can be no assurance that impairment charges will not be required in the future, and any such amounts may be material to our Consolidated Statements of Income.
The December 2005 investment secured a renewal of Google's search advertising deal with AOL, preventing its largest ad partner from defecting to Microsoft. The deal gave AOL a valuation of $20 billion at the time.
Google didn't estimate in its filing what AOL might be worth today, but observers have suggested a figure closer to $10 billion.
Google's deal allows it to demand that Time Warner spin off AOL in an initial public offering of stock or buy back its stake, which would result in a $500 million loss for Google.
Time Warner, perhaps signaling its intention to dispose of AOL to focus on its media business, announced Wednesday that it will split AOL's dial-up unit from its advertising business by early 2009.