The money will also buy Microsoft a non-exclusive license to AOL's remaining 300 patents.
AOL previously announced its intentions to sell patents in order to raise cash. AOL reported Revenue of $2.2 billion and net profit of $13.1 million for 2011. The company said that it had about $408 million in cash available at the end of the year, down from about $802 million in 2010. AOL reported a loss of $783 million in 2010. The company's U.S. subscriber base dropped 15 percent from 3.8 million in 2010 to 3.3 million in 2011, while average traffic to its properties was down 4 percent from 112 to 107 million unique visitors per month.
“The agreement with Microsoft represents the culmination of a robust auction process for our patent portfolio,” said Tim Armstrong, AOL’s chairman and CEO, in a prepared statement. “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.”
Microsoft general counsel Brad Smith said that Microsoft was following AOL's patent portfolio for "years" and the purchase enables the company to own "certain patents that complement [Microsoft's] existing portfolio." The transaction is expected to be completed by the end of this year.
Speaking of a billion dollars, Facebook revealed that it has spent a similar amount to purchase Instagram.