America Online (AOL) Sells its Patents to Microsoft (MSFT) for $1.1 Billion

On Monday, shares of America Online (AOL: Charts, News) surged over 40% after it announced that it was selling 800 patents to Microsoft (MSFT: Charts, News) for $1.1 billion in cash.

The huge infusion of cash increases AOLâ s cash per share by $15, a massive boost for a stock that ended last week at $18. The deal also grants Microsoft a non-exclusive license for AOLâ s 300 remaining patents, which include advertising, search, social networking, mapping, streaming and security software. Daily Chart
AOL, which has been stagnant since being spun off of Time Warner (TWX: Charts, News) in 2009, hasnâ t used most of the patents since evolving into an Internet portal at the turn of the century. Prior to Microsoftâ s offer, AOL only had $408 million in cash. AOL is likely to use the extra cash to acquire more media content companies to complement its $315 million acquisition of the Huffington Post last year. The Microsoft deal is expected to close by the end of the year. Meanwhile, Microsoft gains valuable patents to fend off rivals Apple (AAPL: Charts, News) and Google (GOOG: Charts, News), which have both been on aggressive patent acquisition sprees. Microsoft also gains AOLâ s early social networking patents, which could protect its partner Facebook from further assaults from Yahoo (YHOO: Charts, News), which has recently accused Mark Zuckerbergâ s company of patent infringement. Analysts speculate that Google missed a valuable opportunity to deal Facebook a critical blow by allowing Microsoft, a Facebook stakeholder, to acquire AOLâ s patents. Googleâ s fledgling answer to Facebook, Google+, has failed to dent Facebookâ s indomitable market share since its inception in June 2011. Google also paid $12.5 billion to acquire sinking handset maker Motorola Mobility (MMI: Charts, News) for the sole purpose of stripping the company for patents. Microsoft declined to address the companyâ s plan for the acquired patents, and only stated that â

Published on Apr 10, 2012
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

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