AOL Sells 800 Patents to Microsoft for $1 Billion, AT&T Offloads Yellow Pages Unit

AOL announced that they have agreed to sell more than 800, out of their 1,100 patents, to Microsoft for the hefty sum of $1.056 billion.

“The agreement with Microsoft represents the culmination of a robust auction process for our patent portfolio,” said Tim Armstrong, AOL’s Chairman and CEO. “We continue to hold a valuable patent portfolio as highlighted by the license we entered into with Microsoft. The combined sale and licensing arrangement unlocks current dollar value for our shareholders and enables AOL to continue to aggressively execute on our strategy to create long-term shareholder value.”

AOL also granted Microsoft non-exclusive rights for the remaining 300 or so patents that includes software technologies related to advertising, search, social networking, mapping, streaming, security and so on.

“This is a valuable portfolio that we have been following for years and analyzing in detail for several months,” said Brad Smith, General Counsel and Executive Vice President, Legal and Corporate Affairs, Microsoft. “AOL ran a competitive auction and by participating, Microsoft was able to achieve our two primary goals: obtaining a durable license to the full AOL portfolio and ownership of certain patents that complement our existing portfolio.”

A “significant portion” of the acquired money will be returned to AOL shareholders.  AOL shares rose by 36% in premarket trading.  The patent acquisition is scheduled to finalize by the end of 2012.

AOL was named as one of the greatest innovations that shaped the Internet into what it is today.  The portal became famous for their services that connected people through chat, instant messaging and e-mails.  At their peak, they had over 30 million subscribers worldwide.

But because of unfruitful partnerships, including its team up with Time Warner, and a severe shift in strategy as free portals came about, the company started to crumble.

AOL suffered a major setback when subscribers who wanted to leave their service or cancelled their subscription still got billed.  Later, it was revealed that AOL had an elaborate scheme that rewards their employees if they were able to keep a certain number of subscribers from leaving their Internet service.  To get the reward, their customer service representatives made it hard for people to unsubscribe to their service.  This “retention policy” was soon dissolved.

AOL’s faced an uphill battle ever since, revamping its portal strategy around written content, its core chat tools and an extensive advertising scheme.  AOL, along with Yahoo and other legacy web services, have yet to regain their glory days, and now look to other means of monetization.

And AOL’s not the only one selling off company parts.  AT&T’s offloading its Yellow Pages  unit, also going for about $1 billion.