AOL shareholders should check their mail, because a check is on the way after The company sold 800 patents to Microsoft for $1.1 billion.
The deal, which sent shares of the New York company soaring 43 percent yesterday, will lead to either a dividend or stock buyback, likely by the end of the year.
AOL will return the bulk of the $1.1 billion to investors, CEO Tim Armstrong told The Post yesterday.
“We have a real plan to get a significant portion to shareholders by the end of the year,” Armstrong said.
AOL has been facing pressure from shareholders and activist investors to come up with a plan to lift the company’s shares, which were down 8 percent over the 52 weeks through last week.
Hedge fund Starboard Value has been angling for control of five board seats and lobbied for a number of strategic changes, including killing Patch, a network of hyperlocal news sites.
The $1 billion fund, through a spokesman, declined comment on the move, but people close to the matter said a statement could be issued as soon as today calling the sale a first good step.
The fund believes more needs to be done to improve AOL’s bottom line, these people said.
“In many ways this was the easy thing for them to do,” said a person familiar with Starboard CEO Jeff Smith’s thinking, speaking of the patent sale. “Shareholders need to make sure the [AOL] board is held accountable for the hard stuff.”
That being said, Smith may want to cover his ears.
Armstrong said yesterday that AOL would continue to invest in Patch, and said revenue and traffic at the sites were growing this year.
“You shouldn’t expect the plug pulled anytime soon,” said one Wall Street insider close to AOL. “Armstrong is going to have a pretty big halo for a while now, and Patch is a pet project of his.”
The sale price includes a licensing fee of $100 million. The company could strike similar licensing deals with companies like Google, the source said.
Patents have been hot properties as tech companies take to court to pound each other into submission or wring each other for royalties. Google spent $12.5 billion to buy Motorola Mobility and its patent portfolio last year, and such deals have sparked an intellectual-property boom.
“We happen to be in a market where patent values have gone up,” Armstrong said. “Smartly, we have bought and sold assets at good market times, and now is a strong time.”
gsloane@nypost.com
AOL, Tim Armstrong, Microsoft, The company, shareholders, Starboard
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