Restless Microsoft is eyeing AOL, the search property of Time Warner, after failing to convince Yahoo regarding the takeover deal. The software leader is considering AOL as an alternative, which recorded a net profit of whooping £2.2 billion in the second quarter this year, but lost about £445 million from its internet advertising division.

Silicon Valley insider Henry Blodget stated that a team from Time Warner met executives at Microsoft’s headquarters recently, further saying that the two companies have been in talks several times before. He opined that Microsoft needs to rapidly expand its footprint online so as to remain competitive in internet advertising, cautioning that there are limited large online companies or operations to acquire.

Capitalizing on the tremendous fall in AOL’s stock from £113 billion to around £10 billion as well as a customer base dip from 30 million to 10 million subscribers, Time Warner acquired AOL’s under-performing global internet services and media holdings back in 2001. It is learnt that the same company today is keen to sell AOL, whose subscriber base numbers are identical to that of Yahoo’s, if the price is correct.

Also, AOL has been in talks with Yahoo, which is moving towards a proxy clash involving 5 percent shareholder Carl Icahn. However, the talks have not yielded any outcome so far.

Blodget added that a price tag of up to £7.5 billion for AOL had been muted. This is more or less the same figure reported few days back when Steve Ballmer, chief executive of Microsoft, bid yet another time to capture Yahoo’s search operations.

Ballmer seems to be very keen in turning around the fortunes of his firm’s online-based division and challenge Google straight away.

Moreover, Blodget said that Microsoft needs a partner of adequate size immediately so as to achieve a global stripped-down conversion of its systems on our handheld PCs and laptops along with desktops.

It was earlier this month when Ballmer had given hints about the company’s business model to be changed if it were to accomplish its objective of becoming market leader in the online search business.