Google’s AOL Stake Down By Half?

Back in December 2005, Google paid $1 billion to buy 5 percent of AOL from Time Warner, valuing AOL at a whopping $20 billion. Fast-forward to April 2008. According to The Wall Street Journal, AOL and Yahoo are in talks to combine the two companies. AOL is being valued at $10 billion for the sake of this new proposed deal.

Under the terms being discussed between Yahoo and Time Warner, the latter would fold its AOL unit into Yahoo and make a cash investment in return for about 20% of the combined entity, people familiar with the situation said. The deal, which wouldn’t include AOL’s dial-up access business, would value AOL at about $10 billion.

What that tells us:

* No way AOL’s loser dial-up business is worth $10 billion.
* In the last 25 months, AOL lost half its value.
* And Google took a bath. Their $1 billion investment (5 percent) is now worth exactly half: $500 million.

Of course, AOL has been selling off its parts for the past few years and has raised close to around $3 billion, including the $1 billion it got from Google.