On June 4, rumors circulated that Microsoft was negotiating to purchase AOL. "We've long held that the field of portals will eventually consolidate down from three major players--AOL, MSN, and Yahoo--to two," Nicholas Carlson wrote in the Business Insider article that triggered it all. "It's almost happened a couple of times."

We shall see. As I mentioned in a Microsoft Watch posting when former Microsoft exec Alexander Gounares jumped the mothership to become AOL's CTO, the AOL brand has been steadily sinking for the past few years. That doesn't mean certain brass fittings and jewelry can't be plundered from this particular Titanic, however, before it hits rock bottom: AOL does possess a small percentage of the search-engine market that could become Bing's in one swallow; and there are other intellectual-property assets that could be, as Nick Eaton pointed out on his blog, folded into MSN.

But does that mean Microsoft should consider an AOL buy, even at rock-bottom prices?

I don't think so, personally. Over the past year of its existence, Bing has shown growth potential--despite a few months of either flat growth or slight declines, according to some analyst firms' estimations, the overall trend for the search engine has been incrementally up. Whatever AOL's tiny share of that market, Bing could match it within a year's time. Nor would acquiring AOL for its user-facing assets really affect Microsoft's online competition against Google and Yahoo; There's nothing that AOL provides as a portal, really, that doesn't have its equivalent (or near-equivalent) in a Microsoft service.

In other words, Microsoft would do best to step aside and let this one crash and burn--a percentage of AOL Mail users would migrate to Hotmail, and AIM users to Messenger, with no expenditure of cash on Redmond's part. Remember Microsoft's near-acquisition of Yahoo back in 2008, which would have cost tens of billions and given the software giant a bad case of corporate indigestion? Instead, Microsoft came back in 2009 and struck a search-and-advertising deal that provided a lot of benefit (Bing powering Yahoo's back-end search) at a fraction of the cost. The point is, sometimes doing nothing is the best long-term course of action.

"While there is strong strategic rationale behind such a deal, [it] doesn't seem likely," Clayton Moran, an analyst with Benchmark Co., told Reuters on June 4. "We think Time Warner pursued a sale of AOL prior to spinning it out and wasn't able to find an interested enough buyer."

What do you think?