It might seem obvious to most observers that AOL would want to cut its losses and get out of Bebo sooner rather than later, especially after it confirmed yesterday it was evaluating strategic options for the struggling business (ie shutting it down or selling it).
AOL CEO Tim Armstrong (pictured, left) has been pretty indifferent about the fading social network’s prospects ever since he came on board last year — though he did initially promise to hold on to it.
But Credit Suisse analyst John Blackledge points out in a client note that Bebo’s burdensome $850 million price tag at the time it was bought might serve some beneficial purpose for AOL after all:
Any sale would likely generate (far) less than the $850 million acquisition price, creating a tax loss, which could be used in the future against any capital gains (if AOL were to have any).
The other (and best) option for AOL would be to close Bebo, effectively deeming the asset as worthless and taking a loss deduction.