AOL closes $1B patent deal with Microsoft in effort to calm investors

In case you weren’t aware, patents are big money.

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AOL and Microsoft have finally closed a deal that has Microsoft dishing out $1 billion in exchange for over 800 of AOL’s 1,100 patents. While roughly half of the patents are related to instant messaging, the rest cover areas like advertising, content generation, search, and multimedia.

When news of the sale was announced back in April, AOL’s stock price spiked 43 percent, showing that investors were very much onboard with AOL with the move.

Investor support is unsurprising: As AOL has repeatedly stressed, all of the proceeds from the transaction will go straight to shareholders, not into the AOL coffers.

That’s a big deal, seeing as how investors haven’t been all that happy with AOL as of late. Last month, Starboard Value LP, which has a five percent stake in AOL, drafted a 96-page presentation on the general missteps taken by AOL’s media business. Among these blunders, investors say, was the $668 million AOL spent on the acquisitions of  properties like Huffington Post and local news site Patch, which Starboard Value wants to see shuttered.

Not exactly a vote of confidence, all told.

As a result, it’s also not a big surprise to see AOL’s laser focus on investors and not its bottom line. While shelling out $1 billion won’t erase a history of questionable decisions, it might get investors off AOL CEO Tim Armstrong’s back — at least for a moment.

The move is a big one for another reason: It shows that Microsoft would rather spend the cash on patents rather than get sued over them at some point down the line. Because, like patents, patent suits are also big money.

Photo: Big pile of money/Shutterstock

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