Google Inc., the most-used Internet search engine, may consider making a bid for America Online to keep the company from switching to Microsoft Corp.'s search technology, a Merrill Lynch & Co. analyst said.

America Online, the world's biggest Internet access provider, may replace Mountain View-based Google's search engine with a product from Microsoft, a person familiar with the matter said Thursday. Microsoft also is considering taking a stake in America Online, a unit of Time Warner Inc., the person said.

Google, which receives 12 percent of its sales from advertising and other fees generated by America Online, may make a bid to preserve that income, Merrill's Lauren Rich Fine wrote in a note to clients Friday.

Losing AOL as a client would cut Google's earnings per share by 5 to 10 percent, she said.

"This would certainly protect Google's revenues from AOL," Fine wrote in the report. She rates Google shares "neutral." A Google-AOL deal also may help Google gain content, she said.

Shares of Google, which have risen 56 percent this year, fell $2.42 to $300.20 Friday. The stock of Redmond, Wash.-based Microsoft fell 20 cents to $26.07. Time Warner shares rose 40 cents to $18.90.

"As a public company, we can't ever comment on rumors about acquisitions or potential investments," Google spokesman Michael Mayzel said. AOL spokesman John Buckley declined to comment. Merrill Lynch spokeswoman Carrie Gray said Fine wasn't available to comment on the report.


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Google can fend off Microsoft founder Bill Gates without purchasing AOL, Jeff Matthews, general partner at Ram Partners in Greenwich, Conn., said in an e-mail.

Ram Partners manages more than $25 million, including Google shares.

"They are thwarting him every day just by out-innovating" Microsoft, Matthews said. "These guys have bought cool new technology. They have not bought legacy platforms such as AOL just to keep market share."

Google raised $4.18 billion on Wednesday in a follow-on stock sale, cash the company may use to make acquisitions and develop new products.