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In Praise of AOL

Stocks in this article: AOL GOOG YHOO AAPL MSFT FB

There was also a lot of criticism of Armstrong at this time (and I partook in some of that myself). The shine had come off Armstrong. Many concluded his past success was obviously due to the Google money machine and not his strong selling skills. Others pointed to his quixotic effort to keep pouring money into Patch, AOL's hyper-local website strategy that seemed (and still seems) doomed.

It wasn't lost on people that Patch had been an angel investment of Armstrong's before his arrival at AOL. Armstrong seemed to be throwing good money after bad on a pet project for which he still carried a torch.

Of course, later in November 2011 Armstrong, AOL and the board came under even more scrutiny when an activist investor started making noises about a proxy fight.

Through all this, Armstrong kept on keeping on. He kept making the rounds of the media and investors telling the story, even if it seemed at times no one wanted to listen to him.

He also did a number of practical things. He got the board to use some of its remaining cash on stock buybacks starting in August 2011. He fought off the activists by talking to Microsoft (MSFT) and Facebook (FB) about selling part of its patent portfolio to them in exchange for a lot of cash. That was at the time that newbie Yahoo! (YHOO) CEO Scott Thompson had authorized an attack on Facebook over patents.

Through all that patent fighting that enveloped the tech world with Apple (AAPL), Google and others, AOL was the one company that made out like a bandit from the hysteria. The patent sale and then license back to Microsoft and Facebook was a master stroke.

No one -- not even these patent experts who occasionally go on business TV with bow ties -- ever thought AOL could wrangle a billion dollars out of anyone. It did. When AOL announced the deal, the stock rocketed over 43% in one day. When your stock is only trading for a billion and a half market cap and you do a billion-dollar deal, that's what happens. And it just kept going up.

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