Photo: Illustration: Ellis Hamburger
AOL is going to buy back $600 million worth of stock and also issue a dividend of $5.15 per share, the company just announced in a press release.The money is from AOL’s $1 billion patent sale to Microsoft earlier this year.
This isn’t the right move for AOL, but it’s the one that had to happen if CEO Tim Armstrong wanted to keep his job.
For the first half of 2012, AOL faced a fierce proxy fight from major shareholders.
It did not look good for management.
Then, pulling a rabbit out of his hat, Armstrong sold a bunch of old Netscape patents to Microsoft for ~$1 billion.
He promised shareholders that he would give the money to them, and violá, AOL’s stock price rose and management won the proxy fight.
The right long term move for AOL would be to keep this cash and invest it into a business that could eventually sustain the company and restore growth.
But that’s not what today’s shareholders wanted, and they had Armstrong by the short hairs.