Bidding for patents
Armstrong said he made a call to Microsoft Chief Executive Steve Ballmer alerting him of the decision to sell the patents. The auction included e-commerce companies Amazon and eBay, both of which have been largely absent from the recent patent wars, as well as Google
The AOL deal is one of the larger patent auctions in recent times, representing roughly $1.3 million per issued patent, according to the source. That compares with the bankrupt Nortel Networks patent auction last year -- considered a blowout $4.5 billion sale of its 6,000 patents -- for roughly $1.05 million per issued patent, the source said. The Nortel deal sparked a wave of patent sales and litigation and played a part in AOL's decision to launch a patent auction. Google is in the process of buying Motorola Mobility Holdings
Surprising Price Tag
AOL and Microsoft are no strangers to partnerships. Last year the two companies along with Yahoo
AOL shares soared $7.87 to $26.29 in afternoon trade. One of the pioneering companies during the early days of the Internet, AOL was known for e-mail and dial-up access services. It has been trying to reshape itself into a media and entertainment powerhouse dependent on advertising revenue. Activist shareholder Starboard Value LP had pressed AOL management to pursue a patent auction, arguing the portfolio could produce more than $1 billion in licensing income if properly monetized. The deal, 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. AOL said it expected to use about $40 million of its existing deferred tax assets -- 20 percent of its total -- to offset any ordinary income taxes resulting from the licensing of its remaining patent portfolio.
Evercore Partners and Goldman Sachs acted as financial advisers to AOL. Wachtell, Lipton, Rosen & Katz and Finnegan, Henderson, Farabow, Garrett & Dunner acted as legal counsel. Covington and Burling LLP offered legal advice to Microsoft. If the deal falls through, Microsoft may pay AOL a termination fee of $211.2 million, AOL said in a regulatory filing.
Published Date: Apr 10, 2012 11:35 am | Updated Date: Apr 10, 2012 11:35 am