The merger of internet giant America Online and media conglomerate Time Warner is expected to dramatically transform both industries, and analysts expect that it will trigger a spate of similar old media/new media tie-ups.

It has sparked a frenzy to snap up shares of other media and internet companies as speculators wonder who might be next.

Other internet companies, with money to spend, will be looking round for potential partners.

And investors are doing the same.

On the Dow Jones, Yahoo! shares were up by more than 5%, Walt Disney by more than 11%, Viacom more than 5% and Lycos by more than 7%.

Rupert Murdoch's News Corporation saw its share prices rise 28% on the Sydney stock exchange.

On Asian stock markets, media and technology stocks like Sony and Fujitsu were buoyant as well.

In London, the share price of Granada and Pearson gained strongly.

The strength of such stocks is in stark contrast with other share prices around the world. The major Asian and European stock markets have gone on the slide again, despite the records set by Wall Street on Monday.

The world's largest merger

The �350bn size of the new company makes this the largest merger in history.

The company, to be known as AOL Time Warner, is billed as "the world's first fully integrated media and communications company for the internet century".

Both companies agreed to embark immediately on a programme of intensive cross-promotion, pushing Time Warner content through AOL channels.

Old media meets new media

Online firms are fighting hard to get attractive content onto their sites. Media companies, meanwhile, are struggling to harness the power of the internet.

Time Warner describes itself as one of the world's leading media companies. It owns the cable television channels CNN. TNT, Cartoon Network and Home Box Office and is a publisher of magazines, books and web sites.

Time and People are amongst its best-known magazines.

The company is active in the music business, produces feature films, television programmes and animation, and operates a cable business.

Founded in 1985, AOL has transformed itself from an online service to a provider of interactive services, Internet technologies and e-commerce services.

The company runs two global online services, AOL with more than 20 million members, and CompuServe, with more than 2.2 million members.

In 1999, AOL shocked the online world when it bought internet pioneer Netscape.

AOL has a strategic alliance with computer and software firm Sun Microsystems, targeted at undermining the dominance of Microsoft in the computer business.