updated 09:20 am EDT, Mon April 9, 2012
AOL raises cash through patent deals
AOL made an important deal to raise cash Monday by selling patents to Microsoft. Under the deal, AOL would sell 800 patents to the Windows developer and license out 300 more. The terms would give it an immediate payment of $1.06 billion in cash, and Microsoft would give AOL a perpetual license back.
To help absorb the income tax hit from the deal, AOL would use $40 million of deferred tax assets. The deal was expected to close before the end of the year.
Adding the cash may be vital for AOL, which as of the end of 2011 had $407.5 million in pure cash. Its market cap at $1.75 billion represents more of its current value.
Microsoft hasn't said what it plans to do with the patents, although only some of the patents relate to AOL's content portals and websites. Others are relevant for wireless technology, interfaces, and voice. The acquisition could be an advantage in trying to challenge companies like Motorola over Android by wielding patents firms like Motorola weren't prepared to counter.