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Legg Mason Funds’ Robert Hagstrom on the impact of AOL’s sale of more than $1 billion in patents to Microsoft on the two companies.
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-- Shares of -- well boy it was a tough market day but not for AOL skyrocketed.
43%.
After the struggling online media company announced.
It's selling off more than a billion dollars worth of its patents to Microsoft.
-- 800 of these patents that the CEO has called the company.
Of the company's beach front properties very high quality actually.
-- it's the latest sale in a recent storm of patent purchases across the tech industry but is it a healthy sign for the sector overall.
-- joining us now Robin tax revolt by Legg Mason funds and Robert what is -- is this -- net benefit for the industry.
What's the net benefit to AOL shareholders what you saw today it was a very close -- move but bank by the company to monetize.
An asset that wasn't generating any cash flow it had value.
It just wasn't generating cash flow today generated cash flow and you saw the stock update.
But why wouldn't they had why wouldn't they take these these patents themselves and get the money for the why sell -- -- -- just sitting net.
Well I think -- a little bit -- pressure situation was shareholders are trying to I think increase shareholder value trying to acknowledge the pressure they're under return money to the shareholders will see what they do with the money.
-- but I think this was a very clever move for shale well and to the benefit of AOL shareholders and mostly to the benefit of Microsoft shareholders.
Well you can bet that shareholders are at least happy today that they unlock some of the value that has been hiding within that company's been frustrating go for some shareholders.
But -- you -- look at Robert at at the entire issue of large scale patent purchases.
Yeah there's a flurry of opportunities here and and for example Motorola mobility selling off a big chunk of it to Google -- -- Does it meaningfully change the landscape and and if so how does that then provide real lift for the entire sector.
Well you don't know -- I think they're just slightly less complicated -- Quantum physics I get your hands around.
But but but clearly got out and kind of its knowledge based economy when you're saying more more tech company's even health care technology what are the case patents are you know on the gold that they're going to invest debt.
There's two ways in which patents can add value one answers the call option on a future strategy that you might want to use mothers can be for blocking tackling by keeping competitors that -- Microsoft.
You know has a lot of patents and they generalize generate a lot of -- internally.
So we'll just have to wait and see how the patent strategy at Microsoft unfolds is this a win win both of the for the buy and the sell.
I think so today I think it was I think you know Microsoft obviously acquired patents that they thought was valuable now what I think -- it was kind of interesting is that the -- On these -- from jail well was thought to be somewhere valued around 28290.
-- Two and 8290 million dollars.
Well and the are closing price as you know was north of a billion suggesting.
That there was some competition.
For those -- so yes there's definitely value there.
You know -- Google -- Motorola mobility people certainly show their appreciation to Google stock but today the -- which is Microsoft coming down just slightly so.
Who really gets to benefit here or is it sort of -- Deal's specific the buyer or the seller.
Well today it was say -- well AOL was the winner today but you know some as as a market cap live as a billion dollars moves the -- easier on male well -- it does Microsoft.
So we'll wait and see longer term we'll see how this benefits Microsoft -- AOL shareholders they're smiling today.
What's the next one do you foresee any kind of next big patent -- -- will.
You know what what is so great about our economy you know -- is obviously innovation is something that -- continually is occurring each and every day patents are occurring each and every day.
And what I think is lost on May be a lot of investors is that IBM we're talking about a company close to hundred years old probably has more patents.
Than any other publicly traded company in the wall and they continually generate patents per year so.
As a knowledge based economy is an innovative economy we have a lot of value in these patents that are being.
That are being developed and and and being sold between companies.
All right Robert -- -- Legg Mason funds thank you so much for joining us also.
