Reports published today by Gary Balter, an analyst at Donaldson Lufkin & Jenrette, and Peter Caruso, an analyst at Merrill Lynch, said that AOL may be thinking more seriously about finding an offline retail partner to help boost subscriptions and its brand recognition.
When asked about a possible deal, AOL remained tight-lipped as usual.
"We never comment on market rumors or speculation," said Wendy Goldberg, an AOL spokeswoman.
Wal-Mart and Circuit City did not return calls seeking comment.
The reports come just days after Microsoft announced a $100 million investment in Tandy's RadioShack to market its online services from the electronics retail chain. With the deal, Microsoft will establish "store within a store" arrangements in all RadioShacks across the United States to let customers try out high-speed digital subscriber line (DSL) connections and eventually offer home installation for broadband access.
The possibility of AOL mulling its own retail partnership brings to light the importance for Internet companies to sell services through online and brick-and-mortar channels, the analysts said.
"We believe Wal-Mart is in discussions with AOL regarding a potential strategic alliance possibly along the lines of the Tandy/Microsoft agreement," wrote DLJ's Balter. "By putting AOL kiosks in each store and by linking with AOL, Wal-Mart will instantly transfer its Internet operations from also-ran to leadership."
Merrill Lynch's Caruso said that although AOL may or may not be in discussions with Circuit City, it should consider the retailer as a "second alternative" to RadioShack.
"We think a potential approach by AOL toward Circuit City as a partner is a reasonable expectation," Caruso wrote.
AOL was rumored to have been in discussions with RadioShack before Microsoft closed its deal. On the day of the Microsoft-RadioShack announcement, Caruso also issued an analyst note speculating that AOL would do a deal with Circuit City.
AOL rose 1.5 to 150. Shares of Wal-Mart rose 0.25 to 59.13, and Circuit City dropped 2.5 to 45.13.
News.com's Troy Wolverton and Bloomberg contributed to this report.