Story Filed: Friday, December 10, 1999 6:10 PM EST

NEW YORK (AP) -- America Online Inc. may be close to signing a marketing pact with Wal-Mart Stores Inc., in a deal that would link the Internet powerhouse with the world's biggest retailer.

Speculation of an agreement has circulated on Wall Street this week, and one investment firm said Friday that the announcement of a deal was imminent.

Both companies declined to comment.

Such a partnership would bring together two corporate giants that are both looking to expand their reach on the Internet.

For AOL, aligning with Wal-Mart would step up efforts to grow their subscriber base, which already is nearly 20 million strong. AOL could tap the tens of millions of customers who shop at Wal-Mart's more than 3,600 stores worldwide.

Wal-Mart, meantime, would get a well-respected technology partner that could help them build and gain exposure for their own site, Walmart.com, which is currently being redesigned and is expected to relaunch in early 2000.

``AOL is about as mainstream as you get on the Internet and Wal-Mart is about as mainstream as you get in the retailing world,'' said Seema Williams, an analyst with research firm Forrester Research in Cambridge, Mass. ``Together, they both have incredible reach.''

The rumor of the proposed deal began about a month ago after AOL reportedly lost out on a bid to align with Tandy Corp., which instead agreed to partner with Microsoft Corp. to put kiosks in as many as 7,000 of its RadioShack stores nationwide.

Speculation of an AOL-Wal-Mart alliance has intensified over the last week. Salomon Smith Barney helped to fan the flames Friday, issuing a research note that said a deal would likely be announced soon.

AOL shares rose $5.43 3/4, or more than 6 percent, to $91.68 3/4 in trading at 5:15 p.m. on the New York Stock Exchange, while Wal-Mart gained $1 to $63.25 on the NYSE.

The investment firm cited two scenarios that could come from the partnership.

One is that AOL may help Wal-Mart brand itself as its own Internet service provider. AOL already has several ISP brands, including Gateway and CompuServe.

The other is that Wal-Mart would help demonstrate and sell AOL products and services in its stores. Wal-Mart could set up in-store kiosks where shoppers could search and buy from AOL. Also, free AOL software would be available at Wal-Mart stores.

AOL has been looking for ways to expand its distribution channels. Just last month, AOL signed a deal with Blockbuster Inc., the world's leading video-rental chain, to advertise on Blockbuster's in-store television network and distribute free copies of AOL software at 4,000 of its U.S. stores.

``Right now, AOL sends out millions of its disks through the mall, but only about one percent of those people who get them actually sign up,'' said Ken Casser, an analyst at the New York-based Internet research firm Jupiter Communications.

``A deal with Wal-Mart or any bricks-and-mortar store, they pay for real estate but they probably have a better chance of actually getting people to sign up for AOL.''

Wal-Mart, meantime, could benefit from linking itself with AOL as its launches its much-awaited Web site redesign. Analysts speculated that Wal-Mart could get prime space in the shopping area of AOL as well as turn to AOL for help in running its site.

In addition, the partnership could include a co-branded Wal-Mart-AOL online store, which would only be accessible to AOL subscribers.

Copyright © 1999 Associated Press Information Services, all rights reserved.

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Thanks Anna!