Why AOL Shares Skyrocketed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of AOL (NYS: AOL) have skyrocketed by as much as 47% today after the company agreed to sell patents to Microsoft (NAS: MSFT) .

So what: The Internet pioneer is selling more than 800 patents to the software giant in a $1.1 billion deal, in addition to a nonexclusive license to the rest of its patent portfolio. The company also said it was planning on returning a large chunk of the proceeds to shareholders.

Now what: AOL investor Starboard Value has been calling for AOL to tap into its patent portfolio and estimated it could bring in roughly $1 billion. Many other analysts thought AOL's intellectual property was worth only $300 million, so the $1.1 billion price tag is a nice surprise for shareholders. CEO Tim Armstrong said the deal resulted from a "robust auction process" for its patents.

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At the time thisarticle was published Fool contributorEvan Niuholds no position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool owns shares of Microsoft.Motley Fool newsletter serviceshave recommended buying shares of Microsoft.Motley Fool newsletter serviceshave recommended creating a bull call spread position in Microsoft. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

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