Patently up
AOL soars 43% on $1B deal with Microsoft
AOL SHARES soared through the roof Monday after the lumbering Internet giant announced a lucrative deal to sell its patents.
AOL’S stock shot up 43% to $26.40, hitting its highest level in more than a year as investors cheered its sale of 800 patents to Microsoft for $1.06 billion.
“This was significantly higher than most people anticipated,” Tom Forte, an analyst at Telsey Advisory Group, told the Daily News. “The company has done an excellent job generating shareholder value from their patents.”
AOL, whose revenue has been shrinking since it was spun off from Time Warner at the end of 2009, has been facing pressure from one of its largest shareholders, Starboard Value, to make strategic moves to boost its share price.
In February, Starboard said it will nominate candidates for the company’s board because it wasn’t doing enough to make money from its patents.
Under CEO Tim Armstrong, AOL, which owns news sites The Huffington Post and Techcrunch, has been attempting to transform itself into a premium content company as its advertising business has slowed and its dialup Internet business has shrunk.
“The combined sale and licensing arrangement unlocks current dollar value for our shareholders and enables AOL to continue to aggressively execute on our strategy to create longterm shareholder value,” Armstrong said in a statement.
Patents have become a hot commodity for technology companies as they aim to protect their turfs in a highly competitive environment.
Yahoo has sued rival Facebook for patent infringement involving advertising. Google is buying phone maker Motorola Mobility for $12.5 billion to grab its patents.
AOL will keep a license for the patents it is selling. Microsoft, in turn, will receive a nonexclusive license for the technologies that AOL is keeping. AOL is holding on to more than 300 patents and patent applications.
The patents’ sale is expected to be completed by the end of this year, upon receiving regulatory approvals.