AOL (NYSE: AOL) to sell 800 patents to Microsoft (Nasdaq: MSFT) for $1 billion

Orlando, FL 4/9/12 (StreetBeat) -- AOL Inc (NYSE: AOL) said it would sell over 800 of its patents and related applications to Microsoft Corp (NASDAQ: MSFT), and would grant Microsoft a non-exclusive license to the patents it retains, for slightly over $1 billion in cash.

AOL's shares jumped 37 percent to $25.16 in trading before the bell on Monday. They closed at $18.42 on Friday on the New York Stock Exchange.

The Internet company said it plans to return a "significant portion of the sale proceeds" to shareholders.

AOL will continue to hold over 300 patents including advertising, search, and mapping, and said it received a license to the patents being sold to Microsoft.

"This is a valuable portfolio that we have been following for years and analyzing in detail for several months," Microsoft's General Counsel Brad Smith said.

Last month, media reports said that AOL had hired Evercore Partners after being pushed by activist shareholder Starboard Value LP who believed the company's patent portfolio could produce more than $1 billion in licensing income if properly monetized.

The transaction, which is expected to be completed by the end of 2012, includes the sale of an AOL unit on which AOL expects to record a capital loss for tax purposes.

Evercore Partners and Goldman Sachs acted as financial advisors to AOL. Wachtell, Lipton, Rosen & Katz and Finnegan, Henderson, Farabow, Garrett & Dunner acted as legal counsel.

If the deal falls through, Microsoft will pay AOL a termination fee of $211.2 million, AOL said in a regulatory filing.

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AOL's (NYSE: AOL) Budding Ad Revenue Bumps Stock

Orlando, FL 2/1/12 (StreetBeat) – AOL’s (NYSE: AOL) success in boosting its display ad revenue for the third straight quarter sent its stock up 4.5% in pre-market trading.

AOL still saw profits drop precipitously. Fourth-quarter net income fell 66% to $22 million or 23 cents per share. Revenue declined 3% to $576.8 million.

Some goods news though: Wall Street expected greater revenue losses with EPS closer to 20 cents. And this was the lowest rate of total revenue decline in five years, AOL said.

AOL has tried to supplement its faltering subscription service with acquisitions of TechCrunch and The Huffington Post. By selling ads through these new media portals and on its homepage, AOL’s advertising revenue climbed 10% to $363.8 million. AOL’s new hyper-local news network, Patch, reported its traffic, advertisers, and ad impressions grew 100% year over year.

“AOL took a large step forward in Q4, and I am very pleased with how we ended the year,” CEO Tim Armstrong said.

For the year, AOL saw profits return after a terrible 2010. Net income reached $13.1 million or 12 cents per share—up from a loss of $782.5 million a year ago. Revenue dropped 9% to $2.2 billion. Ad revenue was up though, reaching $1.3 billion from $1.2 billion a year ago.

Both domestic and international demand fueled the growth of its display ad revenue, which totaled $148.2 million. Search advertising revenue fell to $88.4 million, and AOL subscribers continue to jump ship with subscription revenue falling to $194.6 million.

While AOL tries to revamp its business model to focus on display ads, it faces stiff competition from Facebook, Google, Microsoft, and Yahoo!. Building to what may be the largest U.S. Web IPO ever, Facebook is now the leader in display ads, and now accounts for 28% of all U.S. display ad, according to a new report from comScore.

AOL was trading at $17 before the opening bell. Google, Microsoft, and Yahoo were little changed.

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