Well, it looks like MSN is really reaching with this latest story. A tie with AOL? Yikes, that is a step down, not a step up.

Microsoft and Time Warner have explored a variety of possible combinations of the MSN Internet portal with the America Online operation of Time Warner, including a merger of the two into a new company that would be jointly owned, according to several people involved in the talks.

The discussions were initiated by Microsoft, which has Google, its new archrival, clearly in its sights. Microsoft is trying to focus its Internet operations on its developing Web search product rather than its Web portal and Internet access business, which it no longer sees as strategically important.

Microsoft offered to sell its MSN Internet portal and dial-up subscriber business both to America Online and to Yahoo, according to several people with knowledge of the talks. While Yahoo considered and quickly rejected the proposal, Time Warner, the parent of America Online, expressed interest. [Read the rest]