AOL, Inc. (NYSE:AOL) shares soared 45.01% to $26.71 in the early hour, its highest level in more than over a year after the company said that it has agreed to sell over 800 patents to Microsoft.
AOL today announced that it has agreed to sell 800 of its patents and license others to Microsoft Corp. for about $1.06 billion in cash. Additionally, the company has also granted a non-exclusive license to Microsoft for the rest of its patents. After the sale, AOL should have about $15 per share of cash on hand, a part of which the company plans to return to its shareholders.
The stock has made a new 52 week high at $26.78 in today’s session and is currently trading on an unusual volume of 12.62 million shares, which is over 11 times its average daily traded volume.
The remaining 300 or so patents in AOL’s portfolio include software technologies related to advertising, search, social networking, mapping, streaming, and security.
Through this deal, Microsoft will get to take home some of the first social networking patents ever granted. Besides the two deal partners and shareholders, Facebook is the number-one beneficiary. Facebook is a Microsoft partner and is insulated from the legal attacks those patents could have assisted had they ended up in enemy hands.
Through this deal, AOL’s cash reserves will also increase. The company has last year acquired the Huffington Post for $315 million last year, as well as many other smaller media deals, which had left the company with just $408 million of cash on hand.
Looking at the fundamentals, the company’s sales fell 9% in 2011, while adjusted operating profit fell 48%, though the analysts are positive on the stock citing that the stock is trading at an incredibly low 5 times future earnings. Taking into account the new cash, that multiple would rise to about $30.
The deal is expected to be completed by the end of the year, after getting regulatory approvals.
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