The rumors surrounding AOL's desire to sell off its patent portfolio have been floating around tech circles for weeks. Today those rumors turned into a very real $1.056 billion deal with Microsoft.
Although the massive patent sale would appear to severely diminish AOL's inherent value as a possible future acquisition target, the company was careful to point out in today's announcement that it will continue to hold over 300 patents and patent applications. According to AOL, those patents cover areas such as search, content generation/management, social networking, security, mapping, multimedia/streaming, and advertising. The company also secured a license to the patents being sold to 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," AOL CEO Tim Armstrong said in a statement.
Microsoft's general counsel, Brad Smith, said the software giant has been following the portfolio for years and analyzing it "in detail" for several months. "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," Smith said.
The first real hints of a patent sell off surfaced weeks ago when a Bloomberg report claimed that AOL had hired Evercore Partners to find a willing buyer for its 800 patents. The attempt to sell its patents was viewed by some as a way to inject a significant stream of revenue into a company with shrinking sales.
The acquisition of the popular Huffington Post media group last year for $315 million was another move designed to bring new life, and profit, to AOL's content efforts. But after a year of tumultuous executive moves, including the high-profile departures of several key staff and a drastic paring down of its AIM division just weeks ago, AOL's overall revenue continued its relatively steep decline.
The Microsoft transaction is expected to be completed by the end of this year.
Microsoft is no stranger to the patent wars. In February, Microsoft filed a formal complaint with the European Commission, which accused Google and Motorola Mobility of patent abuse. The EU later opened an investigation into Motorola on the issue.
Last year, Microsoft also sued Barnes & Noble for patent infringement over Android-related technology. In October, Microsoft said it had secured patent deals for the "majority" of Android devices.
