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Tag: Starboard

  • AOL Wins Proxy Battle With Starboard: All Board Members Have Been Re-Elected

    AOL released a statement today explaining their proxy battle with activist shareholder, Starboard has come to an end.

    Today, all of their board members have been re-elected for another term signifying that indeed, none of Starboard’s nominations were welcome additions to the AOL team.

    Business Insider published a formal statement from the company:

    “On behalf of AOL’s Board and management team, we want to thank our stockholders for their strong support throughout this process. Over the past few months, we have met with many of our stockholders and greatly appreciate their feedback as well as their commitment to AOL. We intend to be responsive to the messages we heard from our investors and will continue our plans to pursue adding two new independent directors to the Board, who we believe will add additional expertise and relevant perspectives to further enhance the strength of our Board. Today’s outcome reaffirms our strong belief that AOL has the right strategy and team to successfully execute on our plan to continue to deliver enhanced value for all stockholders.”

    You might recall that Starboard issued several activist letters stating that they didn’t appreciate AOL’s efforts to unlock shareholder value and also requested they be allowed to nominate some more appropriate members to the AOL board of directors.

    Of course, this didn’t sit well with many of the AOL shareholders or CEO Tim Armstrong, who blatantly spoke out against Starboard informing them their nominees were unqualified and unwelcome. The recent re-election of AOL’s current board is a strong testament to Armstrong’s sentiments and a gesture of allegiance by the majority of AOL shareholders.

    A recent deal with Microsoft brought over a billion dollars for AOL and now that Starboard is off their back, they plan to divide those funds up amongst shareholders in the most tax efficient way.

    Armstrong claims that brands are going to play an integral part in refining and growing the company in the future, and he hopes to bring them back to profitability by 2013. He also has a goal of connecting brand advertising directly to local advertising. In any event, the future looks a lot brighter for AOL than it did three years ago.

  • Starboard Claims AOL Loses $500 Million a Year on Display Ads

    In comScore’s latest report regarding the top 50 internet properties in the U.S., AOL came in at #5, with over 110 million unique visitors during the month of April. It’s clear that AOL has maintained a steady audience regarding its collection of sites, regardless of problems with its ad content. The company did report a 5% increase in ad revenue for the year, though subscription revenue was down 15%, which lead to a 4% decrease in revenue for AOL overall.

    Still, The Starboard Value LP fund, which has a 5.3% stake in the company, now asserts that AOL is losing roughly $500 million a year in its display ad segment alone. This morning, Starboard asked AOL investors to consider three nominees selected by the firm to add to AOL’s board of directors, when it holds its annual meeting on July 14th. Starboard states that AOL has been unable to “engage constructively with management and the board of directors,” adding, “We believe that AOL is currently losing more than $500 million per year in its Display business alone, masking what otherwise would be a highly profitable company.”

    Starboard had insisted that a “clear strategy is delivering improved results,” though AOL wasn’t hearing it, and denied the board nominees, citing its recent performance. The following are key statements from AOL’s SEC filing earlier today.

    AOL HAS THE RIGHT TEAM AND STRATEGY IN PLACE TO FURTHER ENHANCE STOCKHOLDER VALUE:

    * AOL has made significant operational and financial progress since spinning off from Time Warner only two and a half years ago.

    * AOL has a clear, concise, and publicly communicated growth plan and is on track to meet its strategic goals.

    * AOL’s stock is a top performing stock in our industry year-over-year and year-to-date.

    * AOL stock is up 166% since its low as a direct result of the action taken by AOL’s management and Board.

    * AOL’s Board nominees are diverse and have significant operational, financial and public board experience in AOL’s areas of strategic focus.

    * All of AOL’s senior management and directors own stock in the Company and AOL’s Chairman and CEO is the single largest individual investor in the Company.

    * Starboard’s slate does not have a long-term strategy or relevant industry experience.

    AOL’S CLEAR STRATEGY IS DELIVERING IMPROVED RESULTS:

    * The Board has unlocked over $1.7 billion in value in the last two years.

    * AOL has returned capital to stockholders by buying back 14% of outstanding shares, and has committed to return all of the proceeds of the almost $1.1 billion patent sale to stockholders.

    * AOL has reported three consecutive quarters of better than expected earnings results, which demonstrate that the Board’s strategy is working.

    * The Board has presided over significant improvement of AOL’s operations and financial results, including 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.

    STARBOARD DOES NOT HAVE A LONG-TERM STRATEGY AND THEIR NOMINEES DO NOT HAVE THE RIGHT EXPERIENCE:

    * Rather than present a reasoned strategy for driving stockholder value, Starboard has simply criticized AOL’s long-term strategy and investments in content-based assets, and we believe their goal is to break-up and liquidate the company.

    * AOL’s Board of Directors is diverse and highly qualified. The AOL Board has significant operational, financial and public board experience.

    * On the contrary, we believe Starboard’s nominees would negatively impact the Board’s level of industry expertise, public company experience and diversity.

    * AOL is actively engaged in seeking two new Board members, but believes Starboard’s slate will damage the Company and its relationship with advertisers.

    * Notwithstanding the negative impact of Starboard’s last four public statements with respect to AOL’s strategy, AOL’s stock hit a 52-week high this week, based on AOL’s operating execution, strategic momentum, and continuing to unlock stockholder value.

    It would appear Starboard’s complaints have fallen on deaf ears. AOL shares are up a half a percent today at 14 cents, at $27.75.

  • AOL Informs Starboard their Nominees are Useless

    Things haven’t been stellar for AOL lately, but they are performing better than many expected. Months ago, Starboard, one of AOL’s major shareholder, voiced their concerns over AOL’s performance and what could be done to unlock shareholder value.

    More recently, at the end of February, Starboard issued a formal letter to the AOL board of directors asking that they be allowed to nominate some representatives of their own to the board. Of course, AOL would have none of it, and ever since, AOL has been steeped in a proxy battle that has been dividing shareholders and stalling forward progress.

    Now, as AOL stock reaches a 52-week high driven by a patent deal with Microsoft, the company is striking back against Starboard and calling for members to vote for AOL in the Starboard proxy battle. In today’s SEC filing, they highlight their financial accomplishments and remind everyone of Starboard’s shortcomings with their proposed board nominees.

    They make it clear that Starboard’s nominees would bring nothing to further AOL’s already diverse and resourceful board of directors, and might actually hurt them. Take a look at the following key statements from AOL’s SEC filing earlier today.

    AOL HAS THE RIGHT TEAM AND STRATEGY IN PLACE TO FURTHER
    ENHANCE STOCKHOLDER VALUE:

    * AOL has made significant operational and financial progress since spinning off from Time Warner only two and a half years ago.

    * AOL has a clear, concise, and publicly communicated growth plan and is on track to meet its strategic goals.

    * AOL’s stock is a top performing stock in our industry year-over-year and year-to-date.

    * AOL stock is up 166% since its low as a direct result of the action taken by AOL’s management and Board.

    * AOL’s Board nominees are diverse and have significant operational, financial and public board experience in AOL’s areas of strategic focus.

    * All of AOL’s senior management and directors own stock in the Company and AOL’s Chairman and CEO is the single largest individual investor in the Company.

    * Starboard’s slate does not have a long-term strategy or relevant industry experience.

    AOL’S CLEAR STRATEGY IS DELIVERING IMPROVED RESULTS:

    * The Board has unlocked over $1.7 billion in value in the last two years.

    * AOL has returned capital to stockholders by buying back 14% of outstanding shares, and has committed to return all of the proceeds of the almost $1.1 billion patent sale to stockholders.

    * AOL has reported three consecutive quarters of better than expected earnings results, which demonstrate that the Board’s strategy is working.

    * The Board has presided over significant improvement of AOL’s operations and financial results, including 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.

    STARBOARD DOES NOT HAVE A LONG-TERM STRATEGY
    AND THEIR NOMINEES DO NOT HAVE THE RIGHT EXPERIENCE:

    * Rather than present a reasoned strategy for driving stockholder value, Starboard has simply criticized AOL’s long-term strategy and investments in content-based assets, and we believe their goal is to break-up and liquidate the company.

    * AOL’s Board of Directors is diverse and highly qualified. The AOL Board has significant operational, financial and public board experience.

    * On the contrary, we believe Starboard’s nominees would negatively impact the Board’s level of industry expertise, public company experience and diversity.

    * AOL is actively engaged in seeking two new Board members, but believes Starboard’s slate will damage the Company and its relationship with advertisers.

    * Notwithstanding the negative impact of Starboard’s last four public statements with respect to AOL’s strategy, AOL’s stock hit a 52-week high this week, based on AOL’s operating execution, strategic momentum, and continuing to unlock stockholder value.

    So we can expect this proxy battle between Starboard and AOL to start heating up. I would imagine after this move from AOL, the tides will shift and AOL’s board of directors will want some immediate action and closure on the issue before it begins hurting performance and public relations any further. We’ll keep you updated.

  • AOL Power Struggle Stalls Microsoft Patent Deal

    Last week one of AOL’s biggest shareholders, Starboard Value LP, sent a letter to the AOL board of directors calling of a change of direction in the way the company has been operating and making use of its assets. In their letter they call action to help unlock the true value of AOL’s patent portfolio and licensing agreements from those intellectual properties. Of the recent deal with Microsoft, Starboard offers this commentary from the letter:

    “Although management stated its intention to ‘return a significant portion of the proceeds to shareholders,’ we do not understand why the Company would only return a ‘significant portion’. Why wouldn’t the Company simply return all of the proceeds? We remain concerned that shareholder capital will continue to be used for poorly conceived acquisitions and investments into money-losing initiatives like Patch and other Display properties.”

    Starboard says they want to help AOL, but they insist the current structure and day to day operations are not taking full advantage of the assets available to them to increase the value for their stockholders. Here’s what they claim their plan of action will be:

    “As such, we intend to promptly file preliminary proxy materials with the Securities and Exchange Commission for the election of directors to the AOL Board at the upcoming 2012 Annual Meeting. We remain willing to engage in a constructive dialogue regarding the qualifications of our nominees and a mutually agreeable resolution on board composition. We believe this would be in the best interests of all shareholders.”

    Some other shareholders at AOL haven’t taken a liking to this rigid and hostile stance at Starboard and are coming out to support the administration’s current path exclaiming, “Starboard is proving to be a real distraction and they are potentially destroying value to some degree”.

    Supposedly this uprising from Starboard puts the billion dollar patent deal on the back burner for AOL who had hoped to have it completed by the end of 2012. There is no word on what action AOL will take to defend agaist these advances from Starboard of if they are working to resolve the differences mutually.

  • Big AOL Shareholder Starboard Wants New AOL Board, AOL Not So Much

    Starboard, one of AOL’s biggest shareholders (5.2%) is apparently unhappy with AOL’s current board, and wrote a letter to the company nominating five new board members. AOL disagrees with Starboard’s assessment that these changes are needed.

    The whole thing follows a previous letter from Starboard in December, when the shareholder blasted the company’s content strategy.

    Here’s the new StarBoard letter in its entirety:

    February 24, 2012

    AOL Inc.770 BroadwayNew York, NY 10003Attn: Members of the Board of Directors

    To the Board of Directors,

    Starboard Value LP, together with its affiliates (“Starboard”), currently owns approximately 5.2% of the outstanding shares of AOL Inc. (“AOL” or “the Company”), making us one of the Company’s largest shareholders. As you know, we have strong views regarding the current state and future direction of AOL, which we articulated in our comprehensive letter to the Board of Directors (the “Board”) on December 21, 2011 (the “December Letter”). We appreciate the ongoing dialog we have had with management and certain members of the Board over the past two months. However, we are extremely disappointed that our conversations regarding the issues raised in our letter have stalled. Specifically, we are troubled that the Company remains closed-minded to alternative value creation initiatives, and instead appears solely focused on pursuing the status quo. AOL is a diverse company with tremendous assets in a variety of different businesses that collectively are being undervalued in the marketplace. We continue to believe that significant opportunities exist to unlock value based on actions within the control of management and the Board.

    As one specific example, in addition to the valuable assets highlighted in our December Letter, AOL owns a robust portfolio of extremely valuable and foundational intellectual property that has gone unrecognized and underutilized. This portfolio of more than 800 patents broadly covers internet technologies with focus in areas such as secure data transit and e-commerce, travel navigation and turn-by-turn directions, search-related online advertising, real-time shopping, and shopping wish list, among many others.

    Since our initial public involvement in AOL, we have been approached by multiple parties specializing in intellectual property valuation and monetization, some of whom believe that (i) a significant number of large internet-related technology companies may be infringing on these patents, and (ii) AOL’s patent portfolio could produce in excess of $1 billion of licensing income if appropriately harvested and monetized. Unfortunately, several of these parties have expressed severe frustration that AOL has been entirely unresponsive to their proposals regarding ways to take advantage of this underutilized asset. The Company’s inaction is alarming given our understanding that many of the key patents have looming expiration dates over the next several years which could render them worthless if not immediately utilized.

    As a result of the dynamics highlighted above, we are increasingly uncomfortable with the direction of the Company and the leadership of the Board. To this end, and as a result of our inability to arrive at a mutually agreeable resolution on the composition of the Board, we have identified the following highly-qualified candidates who have agreed to be nominated to the AOL Board at the 2012 Annual Meeting. We believe these nominees possess a well-balanced mix of skill sets to ensure that the Company evaluates, with an open mind and a keen sense of urgency, all alternative strategies to determine the best path forward to maximize value for all shareholders.

    Starboard’s Director Nominees:

    Ronald S. Epstein is the Founder and CEO of Epicenter IP Group LLC, a company dedicated to assisting patent owners in obtaining maximum value for their intellectual property. Previously, Mr. Epstein was Vice President and General Counsel of Brocade Communications Systems, Inc., and Director of Licensing at Intel Corporation. Before joining Intel, Mr. Epstein was a member of the Technology Licensing Group at Wilson, Sonsini, Goodrich and Rosati. Mr. Epstein has more than 20 years of experience in developing, optimizing, and transacting intellectual property asset portfolios, and has delivered significant value to patent owners from the sale or licensing of patents in over 150 transactions.

    Steven B. Fink is currently a private investor with extensive experience building and managing technology companies. Mr. Fink is the former CEO of Lawrence Investments, LLC, a venture with Larry Ellison that owns and manages all of Mr. Ellison’s non-Oracle investments. Lawrence Investments founded and invested in numerous technology, education, medical, and biotechnology companies. Mr. Fink previously served as Chairman and CEO of Anthony Manufacturing Company, Chairman and Managing Director of Knowledge Universe, and Chairman and CEO of Nextera. Mr. Fink currently serves as Vice Chairman of Heron International, and as a member of the Board of Directors of K-12. Previously, Mr. Fink served as the Chairman of the Board of Leapfrog, Inc., and Spring Group until its sale in 2007.

    Dennis A. Miller is a strategic advisor to Lionsgate Entertainment and has been focused primarily on investing at the intersection of media and technology. Previously, he was a General Partner at Spark Capital, a venture fund where he invested in companies including Twitter, CNET, and AdMeld. As a Managing Director for Constellation Ventures, he invested in companies such as Capital IQ. Mr. Miller has also served as Executive Vice President of Lionsgate Entertainment, Executive Vice President of Sony Pictures Entertainment, and Executive Vice President of Turner Network Television.

    Jeffrey C. Smith is co-Founder and CEO of Starboard Value, a New York-based investment firm that is one of the largest shareholders of AOL. Mr. Smith has extensive public company board experience. Currently, he serves on the boards of Regis Corp., and SurModics Inc. Previously, he was the Chairman of the Board of Phoenix Technologies Ltd., and a director of Zoran Corporation, Actel Corporation, S1 Corporation, and Kensey Nash Corp. Mr. Smith also served as a member of the Management Committee for Register.com.

    James Warner is the principal of Third Floor Enterprises, an advisory firm specializing in digital marketing and media. Previously, he was Executive Vice President of Avenue A | Razorfish, and served on the executive committee of aQuantive, its parent company. He has also served as President of Primedia Magazine Group, President of the CBS Television Network, President of CBS Enterprises, and Vice President at HBO. Mr. Warner served as a director on the board of MediaMind Technologies Inc until its sale to DG FastChannel, Inc. in July 2011.

    It is our understanding that the terms of eight directors currently serving on the Board expire at the 2012 Annual Meeting. We would view any attempt by the Company to expand the size of the Board following the receipt of this letter, and given our previous discussions regarding board composition, as a tactic designed to manipulate the composition of the Board with regard to this year’s Annual Meeting. To preserve our rights, and in the event that the Company expands the Board prior to the 2012 Annual Meeting, we are therefore nominating five director candidates. We do not currently intend to seek to replace a majority of the Board. However, we do believe significant change to the composition of the Board is warranted given the qualifications of our nominees and the long-term underperformance of AOL.

    We remain prepared to engage in constructive dialog with the Board to reach a mutually agreeable resolution. However, if an agreement is not reached, we are fully prepared to solicit the support of our fellow shareholders to elect a new slate of directors at the 2012 Annual Meeting who are committed to representing the best interests of all AOL shareholders. Starboard has a long history of working constructively with undervalued public companies to improve board effectiveness and enhance shareholder value. We hope that the Board will begin to recognize that our interests are directly aligned with those of all shareholders and that we only want what is best for AOL and its shareholders.

    Best Regards,

    Jeffrey C. SmithManaging MemberStarboard Value LP

    AOL emailed us its response to the Starboard Letter. Here it is in its entirety:

    The recent improved earnings results of AOL Inc. (“AOL” or “the Company”) highlight the significant progress we are making in executing our strategy to improve AOL’s growth trajectory and create meaningful shareholder value. We ended 2011 with our best performance as a company in the past five years, with substantial growth in advertising revenue, improvements in legacy revenue streams, and significant cost reductions. Our stock price has acted in kind, appreciating approximately 80% from our 2011 low and 20% year- to- date.

    AOL’s Board of Directors and management team consistently review the strategy and performance of the Company and have taken meaningful actions to enhance shareholder return including the divestiture of non- core assets, significant cost reduction, a meaningful buyback of Company equity, and the implementation of an accountable and performance- ‐based culture to operate against our clear strategy.

    AOL has held several meetings with Starboard Value LP to address their questions. AOL communicated our continued intent to simplify AOL’s business and our efforts to accelerate shareholder value creation. AOL has offered Starboard Value LP an opportunity to help shape the Company’s Board of Directors composition and size. Unfortunately, Starboard Value LP has a singularly focused agenda and rejected this productive path to address their stated concerns and drive increased shareholder value.

    Our Board of Directors and management team remain firmly committed to creating value for all shareholders. We have a valuable patent portfolio and several months ago, prior to Starboard’s first letter, the AOL Board of Directors authorized the start of a process, and hired advisors, to realize the value of certain non- strategic patents. AOL has a clear plan to provide our consumers and customers with exceptional value, which we believe will lead to the creation of shareholder value. We will continue to aggressively execute and innovate on our strategy as we continue the turnaround of AOL.