Joff Wild

So Starboard Value was correct. The AOL patent portfolio is worth $1 billion. In fact, it's actually worth a little bit more than that: today it has been announced that Microsoft has agreed to pay $1.056 billion for the 800 patents and will license another 300.

In February Starboard, which owns over 5% of AOL, wrote to the company’s board expressing in no uncertain terms its displeasure at what it considered to be the board’s lack of action in monetising the portfolio. A month later, investment bank Evercore was appointed to explore the options. Whether today’s news is a result of that has not been stated – but two weeks to tie up a $1 billion deal does seem to be cutting it fine, especially given who the purchaser is. Whichever way you look at it, though, this is a vindication for Starboard, and an invitation for other investors in other companies to get interested in patents and how they are being used.

And let’s not forget the intermediaries who put their heads above the parapets and made calls about how much the portfolio was worth. On that front, there is absolutely no doubt. MDB Capital called it almost perfectly. M-Cam, on the other hand, seems to have got it horribly wrong. With that in mind, I’ll leave you with a couple of quotes.

This is from a Bloomberg report dated 29th March:

AOL’s portfolio would be valued at about $290 million in a sale, less than a third of the amount that shareholder Starboard Value LP has estimated it could generate, according to patent-advisory firm M-Cam Inc.

“That is the absolute ceiling price,” David Pratt, president of Charlottesville, Virginia-based M-Cam, said yesterday. “It’s worth much less than what investors have estimated, based largely on the fact that most of AOL’s patents are not commercially viable, or junk grade.”

And this is from another Bloomberg report from 24th March:

Many of AOL’s patents cover Internet advertising and communications services, and the portfolio could fetch as much as $1 billion from a large technology company, said Christopher Marlett, co-founder of MDB Capital Group, an investment bank inSanta Monica, California, focused on intellectual property.

“More than likely the buyer on this would be someone like Google or Microsoft (MSFT),” Marlett said. AOL’s “intellectual property could be a significant percentage of the overall value of the company,” he said. 

I make that MDB Capital 1 – 0 M-Cam!