AOL says to sell 800 patents to Microsoft for $1.0 bn

Apr 09, 2012
AOL has announced it would sell more than 800 patents to Microsoft and license more than 300 additional patents and patent applications for $1.056 billion in cash.

AOL announced plans to sell more than 800 patents to Microsoft in a $1.056 billion deal giving the struggling Internet pioneer a needed cash injection as it seeks to fend off pressure from shareholders.

The deal also provides Microsoft with licenses to more than 300 additional patents and patent applications, AOL said in a statement.

AOL chief executive Tim Armstrong said the deal "unlocks current dollar value for our shareholders and enables AOL to continue to aggressively execute on our strategy to create long-term shareholder value."

Microsoft general counsel Brad Smith said in the statement that the software giant is getting "a valuable portfolio that we have been following for years and analyzing in detail for several months."

He said Microsoft "was able to achieve our two primary goals: obtaining a durable license to the full AOL portfolio and ownership of certain patents that complement our existing portfolio."

AOL said that after the deal is complete, it will continue to hold "a significant patent portfolio of over 300 patents and patent applications spanning core and strategic technologies, including advertising, search, content generation/management, social networking, mapping, multimedia/streaming, and security among others."

AOL also received a license to the patents being sold to Microsoft.

The patent sale includes stock in an AOL subsidiary on which AOL expects to record a loss for tax purposes and as a result, AOL will offset most taxes in the deal.

The company said it intends "to return a significant portion of the sale proceeds to shareholders and will determine the most efficient and effective method to do so prior to the closing of the transaction."

Earlier this year a US hedge fund with a large stake in AOL criticized the strategy of the current management for failing to deliver for shareholders and sought a shakeup.

Starboard Value said in a February letter to the AOL board it was "troubled that the company remains closed-minded to alternative value creation initiatives, and instead appears solely focused on pursuing the status quo."

Starboard proposed five nominees for the AOL board at the next annual meeting.

AOL has been losing money since the collapse of its leadership as an Internet subscription service, and has been seeking to become a more diversified Web firm.

The company fused with news and entertainment giant Time Warner in 2001 at the height of the dotcom boom in what is seen as one of the most disastrous mergers ever. It was spun off by Time Warner in December 2009 into an independent company.

Under Armstrong, hired three years ago, the company formerly known as America online has invested heavily in online content, purchasing The Huffington Post and TechCrunch websites and putting money in local news network Patch.

The transaction is expected to be completed by the end of 2012, the companies said.

AOL did not release details on the patents being sold or licensed. But a report last month by the research firm Envision IP said AOL could get value from about 140 patents related to online communications, focused mainly on instant messaging and email technology.

The report said AOL also owns 77 patents related to search engine technologies, some dating back to the "formative years of Internet development" from 1995 to 2001. Also of value were 41 patents for voice communication including Voice-Over-IP (VoIP) used for Internet telephony.

Explore further: Alibaba surges in Wall Street debut (Update)

add to favorites email to friend print save as pdf

Related Stories

US hedge fund seeks five seats on AOL board

Feb 24, 2012

A US hedge fund with a large stake in AOL laid claim on Friday to five seats on the board of directors of the Internet company and criticized the strategy of the current management.

AOL buys two Web startups

Jun 12, 2009

Internet pioneer AOL, which Time Warner plans to spin off into an independent company later this year, announced on Thursday that it had bought two small Web startups focused on local content.

AOL, Microsoft, Yahoo! in ad deal: WSJ

Sep 15, 2011

AOL, Microsoft and Yahoo! are proposing to offer space on each other's sites to advertisers in a bid to take on Google, The Wall Street Journal reported on Wednesday.

Recommended for you

Alibaba makes Wall Street debut

Sep 19, 2014

Alibaba made its long-awaited Wall Street debut Friday on the heels of a record stock offering that opens the door to global expansion for the Chinese online retail giant.

Alibaba IPO to boost employee fortunes to $8 bn

Sep 19, 2014

Employees of Chinese e-commerce giant Alibaba will see their fortunes swell to nearly $8 billion as the company prepares a massive US stock offering that could be valued at $25 billion.

Alibaba mega IPO caps founder Jack Ma success tale

Sep 19, 2014

When Jack Ma founded Alibaba 15 years ago he insisted the e-commerce venture should see itself as competing against Silicon Valley, not other Chinese companies. That bold ambition from a time when China was ...

User comments : 4

Adjust slider to filter visible comments by rank

Display comments: newest first

Lurker2358
not rated yet Apr 09, 2012
I don't even know why Microsoft would buy these patents.

They'll just get sued by the U.S. and EU governments for monopoly laws.

AOL said that after the deal is complete, it will continue to hold "a significant patent portfolio of over 300 patents and patent applications spanning core and strategic technologies, including advertising, search, content generation/management, social networking, mapping, multimedia/streaming, and security among others."


Wow, a patent on an inferior chat script, an inferior ISP, and an inferior map.

You guys got something there.
JRDarby
not rated yet Apr 09, 2012
Competition is competition, and MS is smart to buy the IP before someone else does. AOL may be inferior in many respects, but patents are for processes rather than practice; doubtlessly MS can find a use for some of the IP. One billion dollars is no small amount but, with its large capital reserves, MS should have no problem absorbing it. In the long run it may simply turn out to cost MS less to buy than to battle.
kaasinees
0.3 / 5 (22) Apr 09, 2012
The EU doesnt even do software patents. Apparently the EU is more intelligent than the US.
A2G
1 / 5 (1) Apr 09, 2012
AOL was a scam from the start...from the start they reported profits for the current year and expenses from the past year...they were losing money big time. Then they scammed millions of people by making it very hard to ever cancel..it took seconds to sign up and hours on the phone to cancel. You couldn't even cancel your account online..Steve Case should be in prison.