AOL has been in the news lately only for two reasons. One, its lagging business and underperforming stock, and two, its recent patent sale to Microsoft, and eventually Facebook, which helped the latter stave off Yahoo’s patent assault on it.
AOL sold off most of its patents to Microsoft for $1.1 billion. Today, the sale has been completed, and AOL, true to its word, has announced that it will be giving the cash back to its shareholders.
It has announced a $600 million repurchase of AOL stock, and a one-time cash dividend of $5.15 per share, which adds up to nearly $480 million.
By returning cash to shareholders, AOL has bought itself some more time to get back in the game. However, that would be much more likely if it had reinvested all the cash in the business itself.
Tim Armstrong, AOL’s CEO, sent out a memo to his staff:
“Our first strategic goal is to build world-class brands that are meaningful businesses and we are going to continue to pursue that with alacrity. The second strategic goal has been to build a substantial financial foundation for our investors and more importantly, our investors’ investors. While we continue to successfully navigate AOL’s turn-around, we are also trying to build immediate value for all of our shareholders.
This morning, we announced the final steps in returning approximately all of the $1.1 billion proceeds from the patent deal with Microsoft to our shareholders by year-end. Specifically, we have begun a transaction with Barclays that is allowing us to pursue the repurchase of $600 million in AOL stock. We also announced a special one time cash dividend of $5.15 per share. The combination of the repurchase program and the special dividend is delivering what we had promised our investors and also allows us to give all shareholders the ability to own a bigger stake in AOL.”