AOL Inc. (NYSE:AOL) has responded to concerns raised by one of itsmajor stockholders Starboard Value LP over the company's investment inthe Display business.
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In a letter to AOL, Starboard expressedthat based on its detailed research and analysis, AOL is deeplyundervalued and that substantial and actionable opportunities exist tosignificantly enhance shareholder value. Starboard believes thisvaluation discrepancy is primarily due to the company's massiveoperating losses in its Display business, as well as continued concernover further acquisitions and investments into money-losing growthinitiatives like Patch.
"It appears that AOL may be currently losing in excess of $500million per year in its Display business alone, masking what otherwisewould be a highly profitable company," Starboard stated.
"While we understand and appreciate that the Company's Accessbusiness is in secular decline, we do not believe this serves asjustification for continuing to pursue a money-losing growth strategy inthe Display business that has repeatedly failed to meet expectationsand drained corporate resources," said Starboard Value CEO JeffreySmith.
"AOL shareholders have already suffered substantial losses due to thepursuit of the failing Display strategy and immediate action must betaken to address this issue as the Company continues to invest goodmoney after bad without an acceptable return on investment," Smithadded.?
Starboard Value owns about 4.5 percent of AOL.
In response to the Starboard letter, AOL issued the followingstatement: "Over the last two years AOL has significantly reduced costs,sold non-core assets, made significant investments for our future, andalso recently repurchased over 10% of outstanding shares....we willcontinue to aggressively execute on our strategy in 2012 as we continuethe turnaround of AOL."
AOL is up 1.35 percent to $15.01 at 1.48 pm EST.?
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