With technology and telecommunication patents so nebulously ambiguous that its as wonder we’re not all subject to some sort of patent infringement lawsuit, AOL has decided to sidestep any such looming litigation by striking a monumental patent sale and licensing deal with Microsoft, shipping hundreds of patents and patent applications to the PC giant.
On the face of it the move appears shrewd and calculated, a bold strategy to give AOL a sharp influx of cash while avoiding the same sort of legal wrangling that currently has Facebook and Yahoo ensnared. Further, its been no secret that of late AOL has seen its fortunes fade and its former glories fade into the past, meaning an injection of revenue could go a long ways to improving investor confidence and getting the Internet service provider back into the game.
But looking deeper, despite what company spin doctors say about increased revenues and strategic partnerships, to me such selloffs smack of desperation, the first sign that the company is offloading cargo from its slowly sinking ship.
In the short term there’s no question that the deal is good for both companies: Apart from the sale of certain vital patents, AOL has signed a non-exclusive licensing deal with Microsoft for $1.056 billion, giving AOL a much needed revenue boost while allowing the service provider to retain ownership over its patent portfolio, a shrewd move that is sure to keep the money flowing. Further, in this era of patent infringement lawsuits, the deal gives AOL a strong reason not to go to court, offering the company money instead of headaches.
Regarding Microsoft, for its money the PC giant gains access to a vital patent trove needed to continue to wage war with Google in almost every tech sector, as for its part the search engine giant has continued to bolster its own patent portfolio as it looks to protect its Android ecosystem and delve into previously untapped markets.
The problem with the deal, for many analysts at least, is the fact that AOL has sold off so many of its key patents, a dangerous dance for any company, more so for one who’s future is hanging in the balance. You see, dallying in the patent game to generate revenues is a delicate dance, sell off to little and there’s no money to be earned now, sell off to much and you’re left with nothing in the future.
The bottom line, if I were an investor in AOL, watching the search engine provider divest much of its vital intellectual property to Microsoft, I would truly be concerned for several reasons: First, despite the fact that AOL has promised “return a significant portion of the sale proceeds to shareholders,” the influx of money strikes me as a smokescreen for AOL’s deeper issues, the fact that it continues to underperform in the market and still has yet to really compete in this broadband era.
To wit, in a statement the company lauded the sale as the first of many steps in a long comeback trail, speaking words, in my experience at least, that have become synonymous will failure, “unlocking value for our shareholders.” While I certainly understand the importance of keeping shareholders satisfied, it seems that such desperation measures almost always lead to failure.
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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.
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