AOL management won a fight for its life yesterday. At the company’s annual meeting in boston, shareholders rejected a proxy challenge from a fund called Starboard and voted to re-elect AOL’s board of directors.But here’s the thing: if it weren’t for the savvy way Armstrong sold some of AOL’s patents to Microsoft for $1 billion – and then promised to give that cash to shareholders through some sort of dividend – we’d probably be talking about a new CEO today.
In the end, shareholders rewarded Armstrong not because he’s done great work strategically deploying AOL’s resources over the past three years, but because in the past few months, he has suddenly started giving AOL’s resources directly to AOL shareholders.
This trick may even work again in the short to medium term. AOL has plenty of asset to sell – starting with AIM and Mapquest. Armstrong could use those proceeds to give more cash to shareholders.
But in the long term, Armstrong and AOL are going to have to figure out a way to invest resources into new businesses that can save the company.
There are few signs that is happening.
AOL’s core businesses, access and search, are still eroding, and despite big investments, the business that’s supposed to be the future, display advertising, remains unprofitable.
Armstrong has a lot of work ahead of him.
AOL has tried to fix the problem through acquisition, but its enterprise value has only shrunk in the process
AOL's biggest acquisition, Huffington Post, has bloated and lost profitability since it was integrated
AOL needs to…
- Slim down Huffington Post back to fighting shape
- End the Patch experiment.
- Sell AIM, Ad.com, and Mapquest