On Monday morning, AOL announced that it had inked a deal to sell and lease a total of about 1,100 patents to Microsoft for a little more than $1 billion.The move comes a few weeks after the hedge fund and AOL investor Starboard Value urged AOL to look into selling its patents portfolio. AOL said a major portion of the proceeds would go to shareholders once the deal closes -- a statement that had spurred a 46% increase in AOL's stock price by Monday afternoon. We caught up with CEO Tim Armstrong to talk about the deal and a few AOL businesses.
Ad Age : What was the goal in selling these patents and when did the process start?
Tim Armstrong: At AOL, we've been working diligently on a dual track. One is the reinvention of AOL's core business and strategy, and that 's abundantly clear: We're turning brands into businesses. And second is the process we started to add more value to shareholders. It started last summer with the buyback of a significant amount of AOL equity and continued with us looking into whether we could unlock some of the value of our patents and IP . So in the fall of 2011 we started to focus on this.
Ad Age : You said that there was an auction and that Microsoft "had the most attractive bid." Does that mean its bid was the highest?
Mr. Armstrong: It had the most value to us as a business.
Ad Age : You said that a significant amount of the proceeds would go to shareholders. Is that 50%, 75%?
Mr. Armstrong: I'll just say a significant amount.
Ad Age : What are the chances of pursuing acquisitions with the remaining proceeds?
Mr. Armstrong: There are no plans to do that right now and, again, the main message is that we've been really focused on organic growth.
Ad Age : In the past week, there have been contradictory reports on Arianna's role, with one saying she has gained more power and another saying she's been demoted. Can you explain her role today compared with when she joined the company?
Mr. Armstrong: We are in the process right now of continuing to take our brands and turn them into businesses, and Arianna's real focus has been making the Huffington Post go from being a U.S.-based blog to a global platform for business. There's no change in the overall structure at AOL. The Huffington Post represents about 10% of our overall employees and probably less than that in revenue, and I think the focus there is to make that a much bigger business -- and that 's what Arianna is focused on and will be focused on.
Ad Age : What's the latest on how the Patch business is trending?
Mr. Armstrong: Patch has been doing very well from a traffic and revenue standpoint and by the beginning of March had already gotten to 80% of sales we did [all of ] last year.
Ad Age : Will Patch reach profitability this year?
Mr. Armstrong: I don't think it will be this year, but the economics around Patch continue to improve.
Ad Age : How are Devil ads being adopted?
Mr. Armstrong: They were adopted as an IAB standard. We established the Devil Network, and Devil continues to perform very well. We also launched more products inside of Devil that are helpful for commerce.
Ad Age : So are there more publishers signing on?
[AOL spokeswoman interrupts to say that the company will have news on that front soon.]
Ad Age :Anything else you want to add?
Mr. Armstrong: We're going from the worst merger in history to continuing to build what I think will be the best brand-centric internet businesses in the world. This is a significant step forward for us and our shareholders.