AOL to Sell More Than 800 Patents to Microsoft

Published: Monday, April 9, 2012 at 9:16 p.m.

Last Modified: Monday, April 9, 2012 at 9:16 p.m.

NEW YORK | Faltering Internet icon AOL was able to squeeze out more than $1 billion from Microsoft for a trove of some 800 patents in an auction, the latest sign of just how valuable such portfolios can be for the world's biggest technology companies.

"There is a fight for market share occurring on multiple fronts ? technology, patents, advertising," said Colin Gillis, an analyst with BGC Financial who covers Microsoft. "Microsoft, more so than others out there, has been (using) its patent portfolio as a way to generate license fees. This should strengthen that."

Microsoft refused to say what the patents cover. Benchmark analyst Clayton Moran said they revolve around Internet technology, including advertising, search and mapping. This would help Microsoft go up against Google Inc., a big rival that is ahead of it in all three areas.

Patents have become a hot commodity in the high-tech industry in recent years. They're useful both for attack ? for suing competitors ? and for defense ? for warding off lawsuits with threats of countersuits.

Rising star Facebook, for instance, recently purchased 750 patents from IBM Corp., a move that likely helped the company defend itself after Yahoo Inc. accused it of violating 10 Yahoo patents. Facebook shot back with its own lawsuit, claiming Yahoo is violating 10 Facebook patents.

Software patents can have broad applications, and thousands of patents can apply to a complicated product like a cellphone. Google is buying phone maker Motorola Mobility Holdings Inc. for $12.5 billion, in large part, to get hold of its patents.

AOL's shares surged to their highest level in more than a year following the announcement. The company agreed to sell 800 of its patents and license others to Microsoft for about $1.06 billion in cash. The New York-based Web site developer and Internet access company said it plans to return some of the sale proceeds to its shareholders. After the sale, AOL said it should have about $15 per share of cash on hand.

Its stock rose $7.83, or 43 percent, to $26.25 in midday trading, adding more than $750 million to its market capitalization. Microsoft shares slipped 20 cents, to $31.32 amid a broader market decline.

AOL's move signals that it is listening to stockholders who are asking for more return on their investment.

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