"There are other efforts underway in-house that are active and more important and would yield better results," said the source, who is close to AOL's high-level decisions. "The rumors that we'll merge keep getting louder and I don't understand it."
Although AOL is looking to penetrate the market of consumers who have yet to tap into the Internet and views television as a viable means, NetChannel will likely need to find another suitor if it seeks a merger.
Wendy Goldberg, AOL spokeswoman, maintained that the company does not comment on rumor or speculation, but noted that the online giant always is looking for ways to invest in new technology. She said that, in the long term, AOL wants be connected to every content-delivery platform that emerges.
She added that AOL believes customers increasingly will be connected to the Internet through a host of appliances in the home--appliances that, of course, will include TV.
Last month, AOL restructured its operations and created an investment unit headed up by its chief financial officer, Len Leader. The unit was designed to identify investment opportunities and manage AOL's portfolio. At the time it was launched, analysts speculated that the investment unit would position AOL for making major acquisitions.
Jim Gustke, NetChannel's vice president of marketing, also declined to comment on any merger discussions that might be underway between the two companies.
"NetChannel is part of a rapidly expanding space, and given AOL's growth, it wouldn't be surprising that they would want to expand into households with TVs," Gustke said.