Will AOL Share the Love?

It looks like AOL (NYSE:AOL) investors will be the big winners in the company’s recent patent windfall, but details are still up in the air, according to a CNN report. AOL Chief Executive Tim Armstrong said Wednesday that 100 percent of the $1.1 billion proceeds of its sale of patents to Microsoft (NASDAQ:MSFT) will go “directly back to shareholders,” but plans have yet to be finalized.

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In April, AOL agreed to sell about 925 patents to Microsoft for $1.1 billion in cash. The company also gave Microsoft and Facebook non-exclusive license to its 300 remaining patents, which relate to its core business, including advertising software technologies, search, social networking, mapping, streaming and security. Facebook has said it will buy 625 of the patents from Microsoft for $550 million.

AOL Chief Financial Officer Artie Minson said a final decision has not been reached on how the proceeds will be distributed. Having already bought back 15 million shares, buying more could “trigger a change in control at the company,” he said. AOL’s balance sheet and cash holdings were looking good as of March 31, with almost $370 million in cash and liquid assets, but Armstrong said, “At this point, if we had a good reason to hang onto a billion dollars in cash, we’d do it. He also noted that the sale “isn’t fully reflected in our valuation” in the market right now. The company’s shares have jumped close to 40 percent since the patent sale was announced.

In general, AOL had a strong first quarter, with earnings of 22 cents per share on sales of $529 million. Overall revenue fell 4 percent year-over-year, global ad revenue was up 5 percent to about $330 million thanks largely to AOL’s third-party ad network, which saw a sales increase of 23 percent year-over-year. The one major disappointment in the ad sector was display ads, which only rose 1 percent since the same period last year to $130 million. One percent seems like small potatoes in an area that AOL has promoted as one of its primary areas of focus.

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