AOL Successfully Implementing the Right Strategy to Deliver Long-Term Stockholder Value

I know we’ve been taking the piss out of Aol* all day, but someone in Aol PR must be drunk, because this bizarre “BREAKING: Board Has Presided over Improvement of AOL’s Operating Results and Financial Strength and Unlocked over $1.7 Billion in Value in Two Years” press release just happened.

We figure that this must be some sort of Zodiac Killer-like word puzzle, where if you take out every three letters it’s an actually a crazy rambling essay about how much whoever wrote this hates their life.

*Disclosure: Aol owns TechCrunch, even though I think they probably regret it at this point.

Full release below.

Board Has Presided over Improvement of AOL’s Operating Results and Financial Strength and Unlocked over $1.7 Billion in Value in Two Years

NEW YORK, May 02, 2012 (BUSINESS WIRE) — –AOL Urges Stockholders to Vote FOR the Board’s Nominees on the WHITE Proxy Card Today

–Mails Letter to Stockholders

AOL, Inc. AOL -1.34% today mailed a letter to stockholders in connection with the Company’s 2012 Annual Meeting of Stockholders scheduled for June 14, 2012.

The following is the text of the letter from Tim Armstrong, AOL’s Chairman and CEO

May 2, 2012
Dear Fellow Stockholder:
Since AOL became an independent public company in late 2009, AOL’s
Board of Directors (“Board”) and senior management have successfully
charted a new strategic and financial course for the Company. This
new approach has significantly improved AOL’s results, enhanced the
prospects for sustained growth, and created value for all
You now face an important decision about the future of your
investment in the Company. At our Annual Meeting of Stockholders on
June 14, 2012, Starboard Value L.P. (“Starboard”), an AOL
stockholder, is seeking to elect its own slate of three Director
candidates to your Board in order to advance its own interests. We
urge you to continue to support the AOL Board and our strategy for
Your vote is important in this election, and we urge you to
vote so that your voice is heard. To elect the AOL Board’s
nominees, we encourage you to vote today by telephone, by
Internet, or by signing and dating the enclosed WHITE proxy card
and returning it in the postage-paid envelope.


— We have STREAMLINED our operations by reducing annual costs by approximately $500 million prior to investment in areas of strategic focus, reducing headcount by 37%, ending unfavorable distribution deals and exiting unprofitable markets.

— We have MONETIZED our patent portfolio by entering into a definitive agreement with Microsoft Corporation (“Microsoft”) to sell over 800 patents and license 300 additional patents and patent applications for $1.056 billion in cash in a tax efficient transaction.

— We have RETURNED capital to stockholders by buying back more than 12% of our outstanding shares since August 2011, and have committed to return a significant portion of the proceeds of the almost $1.1 billion patent sale.

— We have ENHANCED the consumer experience offered by our products by significantly reducing the number of advertisements on our pages, introducing industry-changing offerings like Project Devil, by investing in high-growth opportunities like The Huffington Post, goviral and Patch, by improving our search product, and by tailoring our Subscription service to our customers’ needs through curated service bundles and

— We have FOCUSED our product portfolio by investing in key destination brands, including, The Huffington Post, Moviefone, DailyFinance, Stylelist, Engadget and TechCrunch, while outsourcing non-core content such as Sports, Health and Real Estate Listings.

Our strategy has positioned the Company to succeed in a digital
landscape that is still being formed. AOL has developed a
premier portfolio of online brands. On a monthly basis, our brands
serve the needs of more than 200 million consumers around the
world and we have a full-service suite of advertising products
that allows our thousands of advertising partners to reach
meaningful audiences at scale. We believe our strategy has
positioned AOL for success today and in the future of the digital
media space. Our strategy is working, has created significant
stockholder value, and will create even more stockholder value
over the long-term–if YOU, by supporting the AOL Board, allow
that strategy to proceed.


AOL ended 2011 with our best relative performance as a Company
in the past five years with advertising revenue growing once
again for the first time since 2008, with significant improvements
in legacy revenue streams and with substantial cost reductions. As
a result, the Company is well on its way to achieving its goal of
total company revenue and adjusted operating income before
depreciation and amortization (“Adjusted OIBDA”) growth in 2013.
Our improved results demonstrate the significant progress we have
made in executing our strategy.

— We have ACHIEVED revenue growth in global display revenue for the first time since 2007 in the first quarter of 2011 and grew global display revenue year-over-year in each quarter of 2011 and by 15% in the fourth quarter of 2011.

— We have ATTAINED four consecutive quarters of year-over-year revenue growth in search on and three consecutive quarters of year-over-year revenue growth in Third Party Network revenue.

— We have ACCOMPLISHED significant improvements in key metrics in the fourth quarter of 2011, including a double-digit growth rate in video revenue, video ad impressions, Project Devil advertisers and revenue, and a triple-digit growth rate in local traffic, advertisers, ad impressions and revenue.

— We have PRODUCED substantial progress in moderating the decline in subscription revenues, with the first sequential growth in subscription revenues since 2006 occurring in the fourth quarter of 2011 and

— We have REALIZED two consecutive quarters of sequential Adjusted OIBDA growth through the fourth quarter of 2011 and the first increase in free cash flow year-over-year since the first quarter of 2009.

AOL is investing in high-growth areas, such as Patch. Patch
offers a flexible and powerful solution connecting national,
regional and local advertisers with highly-engaged, hyper-local
audiences on one platform. The opportunity for local online
advertising is massive and growing, with the market expected to
increase to $38.5 billion by 2016 (BIA/Kelsey, March 2012). As
part of our strategy to leverage our existing competencies in this
area by growing consumer traffic to Patch sites and then
implementing a scaled monetization plan, we have established more
than 850 individual Patches and we are now focusing on increasing
the monetization of those Patches. We believe this strategy is
working, as Patch ended the fourth quarter of 2011 with
triple-digit year-over-year revenue growth and approximately 6,500
advertisers. Furthermore, as of March 2012, Patch had already sold
advertising equivalent to over 80% of its revenue for the entire
year in 2011, illustrating that the growth witnessed in the fourth
quarter has continued into 2012. We expect to remain on this rapid
trajectory of revenue growth and assuming that trend sustains and
is coupled with expense control and continued strong consumer
engagement, we will maintain our course to take advantage of this
opportunity. We believe Patch is exceptionally positioned to grow
in the local space and we believe it will yield meaningful returns
for our shareholders in the years to come.


The Board has a clear and consistent pattern of unlocking
significant stockholder value and has increased our cash
position from $100 million as of December 31, 2009 to more than
$400 million as of December 31, 2011:

— In 2010, we DELIVERED $650 MILLION in stockholder value by divesting non-core assets, such as Bebo,, DMS, ICQ and certain real estate properties.

— In 2011, we INITIATED A $250 MILLION stock repurchase authorization and

— Now, in 2012, we will GENERATE OVER $1 BILLION in stockholder value from the Microsoft patent transaction, and we intend to return a significant portion of these proceeds to our stockholders.

Our Board is committed to creating stockholder value and
nowhere was this more evident than on April 9, 2012, when AOL
announced that it had entered into a definitive agreement with
Microsoft to sell over 800 patents and license 300 additional
patents and patent applications for almost $1.1 billion in cash.
The structure of this tax-efficient transaction, with a combined
sale and licensing agreement, allows AOL to monetize its valuable
patent portfolio without selling the Company’s foundational
patents that span core and strategic technologies. The patent
transaction represented the culmination of a process of exploring
ways to monetize intellectual property that began in October 2011
and was the result of a robust auction process.
AOL will return a significant portion of the sale proceeds from
the patent transaction to stockholders. Having unlocked the
value of the Company’s patent portfolio for stockholders, AOL
intends to return a significant portion of the proceeds to
stockholders and we will determine the method to do so prior to
the closing of the patent transaction. The current Board and
management of AOL have a track record of actively returning
capital to stockholders, with the Company having repurchased more
than 12% of its shares outstanding since August 11, 2011.


As AOL’s stock price has appreciated, it has outperformed the
Company’s peers. Our strategy has delivered improved
performance and our stock price has increased. AOL’s stock price
has appreciated approximately 144.6% from its 2011 low and 65.6%
year-to-date through April 20, 2012. Even before the recent
significant increase due to the patent transaction, AOL’s stock
performance through April 5, 2012 represented a 80.2% increase
from its 2011 low and a 22.0% increase year-to-date. Furthermore,
AOL’s stock price has outperformed the market over the last 12
months, appreciating 25.3% relative to (1.3)% and 7.1% returns for
the S&P Midcap 400 index and NASDAQ Composite index, respectively.
Our stock price also outperformed the market prior to the patent
transaction, with our 22.0% increase year-to-date as of April 5,
2012 beating 12.0% and 18.2% returns for the S&P Midcap 400 index
and NASDAQ Composite index, respectively. Your support will
enable us to continue to pursue the strategy that has achieved
these returns.


AOL’s Board has the experience, qualifications and diversity
necessary to provide effective oversight and direction to the
Company. All of AOL’s Directors have extensive executive
and/or public company board experience in a variety of businesses
that are highly relevant to oversight of AOL. These businesses
include display advertising, marketing, journalism, digital media,
television, finance and business development. Your Board has
brought its substantial experience to bear through active
engagement in AOL’s turnaround strategy to create value for
stockholders, with members holding or having held senior
management or board positions at brand-name companies such as, Automatic Data Processing, Inc., CBS Corporation, Gilt
Groupe, Inc., Google Inc., Kraft Foods Inc., The Proctor & Gamble
Company, and respected organizations including the John S. and
James L. Knight Foundation, and The Paley Center for Media, among
many others.
AOL’s Board is independent and has a stockholder-friendly
corporate governance structure that provides rigorous oversight of
AOL’s strategic direction. Your Board consists of eight
highly-qualified, annually elected Directors, seven of whom are
independent. In addition, all five of the standing committees of
the Board are comprised entirely of independent Directors and the
Board has a Lead Independent Director to ensure effective and
independent oversight of management. Because all of our Directors
have joined the Board within the past three years, each member
brings a fresh outside perspective.
The interests of AOL’s Board and management team are directly
aligned with the interests of our stockholders. All of our
Directors and senior executives own AOL stock. To ensure that the
interests of senior executives are fully aligned with
stockholders, the Company instituted stock ownership guidelines
for AOL senior executives that encourage behaviors that have a
positive influence on stock price appreciation and total
stockholder return, and all executives are in full compliance.
Additionally, AOL Directors and executive officers collectively
hold almost 5% of AOL’s stock. Furthermore, cash compensation
from performance bonuses for senior executives is almost entirely
tied to Adjusted OIBDA and Free Cash Flow. In 2011, over 69% of
our Chairman and CEO’s compensation and 78% of our other senior
executives’ compensation was from equity and cash performance
bonuses as the Company had its second sequential growth in
Adjusted OIBDA in the fourth quarter of 2011 and saw Free Cash
Flow grow year-over-year for the first time since the first
quarter of 2009.


AOL seeks your support in electing the Company’s eight highly
qualified nominees and your Board unanimously recommends that
stockholders vote “FOR” the Company’s experienced and
highly qualified Director nominees: Tim Armstrong, Richard
Dalzell, Karen Dykstra, Alberto Ibarguen, Susan Lyne, Patricia
Mitchell, Fredric Reynolds and James Stengel.
Your vote is extremely important, no matter how many or how few
shares you own. Whether or not you plan to attend the Annual
Meeting, you have an opportunity to protect your investment in AOL
by voting the WHITE proxy card. We urge you to vote today
by telephone, by Internet, or by signing and dating the enclosed
WHITE proxy card and returning it in the postage-paid envelope
provided. Please do not return or otherwise vote any proxy card
sent to you by Starboard. If you have any questions or need
assistance voting your shares, please contact MacKenzie Partners,
Inc., which is assisting us in connection with this year’s Annual
Meeting, at 800-322-2885.
On behalf of your Board, we thank you for your continued support
of AOL as we work to create a lasting business that provides
stockholders with exceptional value.
Tim Armstrong
Chairman and Chief Executive Officer

If you have any questions, require assistance in voting your
shares, or need
additional copies of AOL’s proxy materials, please call
MacKenzie Partners
at the phone numbers listed below.
Mackenzie Partners, Inc.
105 Madison Avenue
New York, NY 10016
(212) 929-5500 (call collect)
TOLL-FREE (800) 322-2885

About AOL

Having helped millions of Americans to get online, AOL Inc. AOL -1.34% is on a mission to inform, entertain and connect the world. The home of a world-class collection of premium brands, AOL creates original content that engages audiences on a local and global scale. We help marketers connect with these audiences through effective and engaging digital advertising solutions.

From time to time, we post information about AOL on our investor relations website ( ) and our official corporate blog ( ).

Forward-Looking Statements

This letter may contain “forward-looking statements” within the meaning of the federal securities laws, including statements concerning anticipated future events and expectations that are not historical facts. Words such as “anticipates,” “estimates,” “expects,” “projects,” “forecasts,” “intends,” “plans,” “will,” “believes” and words and terms of similar substance used in connection with any discussion of future operating or financial performance identify forward-looking statements. These forward-looking statements are based on management’s current expectations and beliefs about future events. As with any projection or forecast, they are inherently susceptible to uncertainty and changes in circumstances. Except as required by law, we are under no obligation to, and expressly disclaim any obligation to, update or alter any forward-looking statements whether as a result of such changes, new information, subsequent events or otherwise. Various factors could adversely affect our operations, business or financial results in the future and cause our actual results to differ materially from those contained in the forward-looking statements, including those factors discussed in detail in the “Risk Factors” section contained in our Annual Report on Form 10-K for the year ended December 31, 2011 (the “Annual Report”), filed with the Securities and Exchange Commission. In addition, we operate a web services company in a highly competitive, rapidly changing and consumer- and technology-driven industry. This industry is affected by government regulation, economic, strategic, political and social conditions, consumer response to new and existing products and services, technological developments and, particularly in view of new technologies, the continued ability to protect intellectual property rights. Our actual results could differ materially from management’s expectations because of changes in such factors. Achieving our business and financial objectives, including growth in operations and maintenance of a strong balance sheet and liquidity position, could be adversely affected by the factors discussed or referenced under the “Risk Factors” section contained in the Annual Report as well as, among other things: 1) changes in our plans, strategies and intentions; 2) continual decline in market valuations associated with our cash flows and revenues; 3) the impact of significant acquisitions, dispositions and other similar transactions; 4) our ability to attract and retain key employees; 5) any negative unintended consequences of cost reductions, restructuring actions or similar efforts, including with respect to any associated savings, charges or other amounts; 6) market adoption of new products and services; 7) the failure to meet earnings expectations; 8) asset impairments; 9) decreased liquidity in the capital markets; 10) our ability to access the capital markets for debt securities or bank financings; 11) the impact of “cyber-warfare” or terrorist acts and hostilities and 12) the approval of the patent transaction with Microsoft Corporation by antitrust authorities and the satisfaction of the other closing conditions to that transaction as well as to factors that could affect the manner, timing and amount of the return of any of the sale proceeds to AOL shareholders including the need for AOL to retain cash for its business or to satisfy liabilities.

Additional Information

In connection with the solicitation of proxies, AOL has filed with the Securities and Exchange Commission, a definitive proxy statement and other relevant documents concerning the proposals to be presented at AOL’s 2012 Annual Meeting of Stockholders. The proxy statement contains important information about AOL and the 2012 Annual Meeting. In connection with the 2012 Annual Meeting, AOL has mailed the definitive proxy statement to stockholders. In addition, AOL files annual, quarterly and special reports, proxy statements and other information with the SEC. You are urged to read the proxy statement and other information because they contain important information about AOL and the proposals to be presented at the 2012 Annual Meeting. These documents are available free of charge at the SEC’s website ( ) or from AOL at our investor relations website ( ). The contents of the websites referenced herein are not deemed to be incorporated by reference into the proxy statement.

AOL and its directors, executive officers and certain employees may be deemed to be participants in the solicitation of proxies from AOL’s stockholders in connection with the election of directors and other matters to be proposed at the 2012 Annual Meeting. Information regarding the interests, if any, of these directors, executive officers and specified employees is included in the definitive proxy statement and other materials filed by AOL with the SEC.


AOL, Inc.
Maureen Sullivan, 212-206-5030
Investor Relations:
AOL, Inc.
Eoin Ryan, 212-206-5025