AOL decides to sell what remains of its commercial value for exactly the price that bankers predicted it might fetch (implication: AOL received not one penny in premium for this trove). The reason for selling its intellectual property, virtually the only assets the company has for generating future value, was to 'unlock current dollar value for our shareholders,' according to Tim Armstrong, the star-crossed company's latest, but probably not last, CEO.
Hmmm. So we guess this means that AOL and its bankers have decided that given their brilliant stewardship of the company's asset base and growth to date, investors will simply flock to buy more shares. Especially now that the company's leadership has considered its strategic options and decided that selling the rights to its future growth for a one-time 'liquidity event' thereby annointing themselves the most skilled disbursors of the resultant cash windfall, is the optimal management choice... Would that investors really were that stupid.
Meanwhile, back in Redmond, MSFT just laid out $1 billion of its approximately $55 billion cash hoard to acquire this jumble of aging ideas. Microsoft can certainly afford it, but what does this tell us about their faith in their own pipeline and prospects?
This was not a stirring day in the annals of value creation for either party involved. JL
Ben Popper reports in Venture Beat:
News hit the wires this morning that AOL plans to sell 800 of its 1100 patents to Microsoft for $1 billion in cash, money CEO Tim Armstron says will be used to repay AOL shareholders. This one time transaction also grants Microsoft a no-exclusive license to to the 300 remaining patents which cover key technologies like advertising, search, content generation/management, social networking, mapping, multimedia/streaming, and security.
Like Yahoo, AOL is an aging internet giant struggling to produce meaningful technologies and grow its business.
Both are looking to unlock value from their vast trove of patents, but while Yahoo has gone down the legal road, suing Facebook, AOL has decided to simply sell. The $1.056 billion it got from Microsoft is pretty much exactly what bankers estimated its patents would be worth.
“The agreement with Microsoft represents the culmination of a robust auction process for our patent portfolio,” said Tim Armstrong, AOL’s Chairman and CEO, i a statement. “We continue to hold a valuable patent portfolio as highlighted by the license we entered into with Microsoft. 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 long-term shareholder value.”
“This is a valuable portfolio that we have been following for years and analyzing in detail for several months,” said Brad Smith, General Counsel and Executive Vice President, Legal and Corporate Affairs, Microsoft. “AOL ran a competitive auction and by participating, 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.”
While it’s true that AOL still retained some patents and will be able to license them to other players, this seems like a one time deal that represents a large portion of the value AOL held in its patents. The emphasis on returning the money to shareholders seems to indicate that AOL is hoping to goose its stagnant stock price with the promise of a payout, giving Armstrong ore breathing room as he looks to turn the media/advertising business around
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