By Tom Foremski for Silicon Valley Watcher.com

Why would GOOG be interested in AOL? That's a bit of a puzzle and here is Citigroup's Mark Mahaney and Tom Berquist's flash thought summary:

It is being reported that Google and Comcast are in negotiations to take a minority stake in America Online for as much as $5B. We don't have a definitive read on the likelihood of such a deal, but here is our take.
* Depending on what the stake would be in, the implied valuation could appear reasonable. AOL generated $631MM in H1:05 advertising revenue. Assuming a 50% margin, that's an EBITDA run rate of...$631MM. Assuming a $10B valuation, that's 15.8X EBITDA. That's reasonable given comps.
* What's in it for GOOG? Possibly a spoiling action vs. MSFT, which has reportedly been in talks with AOL. Either GOOG ups the price for MSFT or guarantees the 2.6% of its net revenue that comes from AOL.
* Other rationales for GOOG? Accessing content, demographic information that could be used to target search, and IM interoperability. We're skeptical on these, however.

http://www.citigroupgeo.com/pdf/SBD73350.pdf

I think that this report, from Nick Shelness at Ferris Research might provide a better clue as to what GOOG might be interested in...

A recent briefing from AOL's instant messaging (AIM) division indicates that it might finally be getting its act together to offer capabilities beyond presence and typed text. AOL's intent is quite breathtaking. AIM plans to own the place, the computer application and screen real estate from which consumers access, initiate, and control all forms of interpersonal communication. This communication will include:

* A multi-device address book.

* Multi-device presence.

* A multi-device calendar.

* Email.

* Instant messaging (typed text).

* Text messaging via the SMS.

* Voice and Video over IP (VoIP) to and from other AIM users as well as, where appropriate, to and from the PSTN.