In an assessment that could lead to a substantial charge against its future profits, Google believes its â‚¬668 million (US$1 billion) investment in advertising partner AOL is souring.
An Associated Press report further quoted the company disclosing in a quarterly report filed with the Securities and Exchange Commission that the 5% AOL stake that it bought in 2005 'may be impaired.'
Impairment is an accounting term used to describe an acquisition or investment that has eroded.
Unless there is an about-face, the acquiring company eventually must absorb a charge on its books to account for the diminished value of its holdings.
Google acknowledged for the first time that it might have to recognize a loss on its 5% stake in AOL, whose struggles have made it a financial albatross for its owner, Time Warner, the Associated Press report said.
A Google spokesman declined further comment.
As the internet's most profitable company, Google could absorb a fairly large charge without too much pain.
Google bought its stake in AOL largely to prevent one of its largest advertising partners, AOL, from defecting to Microsoft. The bidding war helped drive up AOL's implied market value to â‚¬13.3 billion (US$20 billion), based on Google's investment.