AOL and Microsoft Announce $1.056 Billion Patent Deal

AOL to sell more than 800 patents to Microsoft; Microsoft to license more than 300 additional patents and patent applications from AOL

Transaction is tax-efficient for AOL

Upon closing, AOL expects to return a significant portion of the proceeds to shareholders

AOL Inc. (NYSE: AOL - News) (the “Company”) today announced that the Company has entered into a definitive agreement to sell over 800 of its patents and their related patent applications to Microsoft Corporation (NASDAQ: MSFT - News) (“Microsoft”) and to grant Microsoft a non-exclusive license to its retained patent portfolio for aggregate proceeds of $1.056 billion in cash.

Following the sale, AOL will continue to hold a significant patent portfolio of over 300 patents and patent applications spanning core and strategic technologies, including advertising, search, content generation/management, social networking, mapping, multimedia/streaming, and security among others. AOL also received a license to the patents being sold to Microsoft.

The patent sale includes the sale of the stock of an AOL subsidiary upon which AOL expects to record a capital loss for tax purposes and as a result, cash taxes in connection with the sale should be immaterial. Additionally, AOL expects to utilize approximately $40 million of its existing deferred tax assets, representing approximately 20 percent of its total deferred tax assets, to offset any ordinary income taxes resulting from the license of its remaining patent portfolio.

AOL management and its Board of Directors intend to return a significant portion of the sale proceeds to shareholders and will determine the most efficient and effective method to do so prior to the closing of the transaction. Pro forma for the sale and license, as of December 31, 2011, AOL would have had approximately $15 per share of cash on hand.

“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.”

“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.”

The transaction is expected to be completed by the end of 2012, upon the satisfaction of customary conditions and regulatory approvals, including expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

Evercore Partners and Goldman Sachs acted as financial advisors and Wachtell, Lipton, Rosen & Katz and Finnegan, Henderson, Farabow, Garrett & Dunner acted as legal counsel to AOL in connection with the transaction.

About AOL

AOL Inc. (NYSE: AOL - News) is a brand company, committed to continuously innovating, growing, and investing in brands and experiences that inform, entertain, and connect the world. The home of a world-class collection of premium brands, AOL creates original content that engages audiences on a local and global scale. We help marketers connect with these audiences through effective and engaging digital advertising solutions.

From time to time, we post information about AOL on our investor relations website (http://ir.aol.com) and our official corporate blog (http://blog.aol.com).

Forward-Looking Statements

This press release contains "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, but are not limited to, statements regarding the anticipated benefits of the transaction, the expected closing date and other statements identified by words such as "may," "will," "intend," "estimate," "should," "expect" or similar expressions. These statements are based on the current expectations and beliefs of AOL's management, and are subject to uncertainty and changes in circumstances, including, but not limited to, the approval of the transaction by antitrust authorities and the satisfaction of the other closing conditions to the transaction as well as to factors that could affect the manner, timing and amount of the return of any of the sale proceeds to AOL shareholders including the need for AOL to retain cash for its business or to satisfy liabilities, the tax treatment of the return of proceeds. Any forward-looking information is not a guarantee of future performance and actual results may vary materially from those expressed or implied by the statements herein, due to changes in economic, business, competitive, technological, strategic and/or regulatory factors. More detailed information about these factors as they relate to AOL may be found in the section entitled "Risk Factors" in AOL's Annual Report on Form 10-K for the year ended December 31, 2011, filed with the U.S. Securities and Exchange Commission. AOL is under no obligation to, and expressly disclaims any obligation to, update or alter the forward-looking statements contained in this press release, whether as a result of new information, future events or otherwise.

Contact:
AOL Inc.
Media:
Maureen Sullivan, 212-206-5030
This email address is being protected from spambots. You need JavaScript enabled to view it.
or
Investor Relations:
Eoin Ryan, 212-206-5025
This email address is being protected from spambots. You need JavaScript enabled to view it.