MICROSOFT CORP. $32 (Nasdaq symbol MSFT; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 8.4 billion; Market cap: $268.8 billion; Price-to-sales ratio: 3.7; Dividend yield: 2.5%; TSINetwork Rating: Above Average; www.microsoft.com) is paying $1.1 billion for 925 patents held by AOL Inc. (New York symbol AOL). It will also license another 300 patents from AOL. Microsoft held cash of $59.5 billion, or $7.09 a share, on March 31, 2012, so it can easily afford this purchase.
After the sale closes in the next few weeks, Microsoft will then sell 650 of AOL’s patents to social network operator Facebook Inc. for $550 million. As part of the deal, Microsoft will retain a licence on these patents.
AOL’s patents cover Internet communications technologies such as email and instant messaging. Controlling them will help Microsoft defend itself in future patent disputes. The patents will also let the company charge higher licensing fees to smartphone makers.
Microsoft is a buy.
