(Reuters) - Activist investment account Starboard Value has taken a 4.5 percent interest in AOL Inc and is pulling for a assembly with a Internet company's arch executive and a house to residence what it sees as vital failings.
Starboard sent a minute to AOL CEO Tim Armstrong and a house on Wednesday in that it pronounced AOL is deeply undervalued and blamed a company's large handling waste in a display advertising business.
It also voiced regard over serve acquisitions and investments in money-losing expansion initiatives like a internal use business Patch. Armstrong was an early financier in Patch before he assimilated AOL in 2009.
Armstrong has led a devise to drive a association toward a arrangement promotion and content business indication identical to Yahoo Inc. Under Armstrong, AOL has spent scarcely $700 million in acquisitions including high-profile names like Huffington Post and TechCrunch.
But even before he joined, AOL had done even bigger acquisitions to try to reinvent itself. It spent $850 million shopping amicable networking site Bebo in 2008, that was sole for reduction than $10 million only dual years later.
Starboard, that estimated that AOL might be losing some-more than $500 million per year in a arrangement ad business alone, asked for an in-person assembly with a house to plead how a company's handling opening and a gratefulness can be improved.
The fund, that manages resources in a "upper hundreds of millions" is looking to rivet with a house forward of a annual shareholder assembly on Feb 25, when directors will be adult for re-election.
Shares in AOL have depressed some 40 percent given being spun off from Time Warner Inc in late 2009. Starboard argued in a eight-page minute that investors are now totally discounting a arrangement promotion and calm business that Armstrong has focused a business's destiny on.
Starboard pronounced a marketplace now prices a whole business during around a value of AOL's disappearing dial-up Internet entrance business and a net money position.
Armstrong has been perplexing to fast develop AOL pided from a timorous though essential business. The dial-up business is believed to be in long-term depot decrease as some-more Americans take adult wire broadband and other faster connections.
"While we know and conclude that a company's entrance business is in physical decline, we do not trust this serves as justification for stability to pursue a money-losing expansion devise in a arrangement business that has regularly unsuccessful to accommodate expectations," a minute said.
AOL argued in a matter that it has "significantly reduced costs, sole non-core assets, done poignant investments for a future, and also recently repurchased over 10% of superb shares," over a final dual years.
The New York-based association also pronounced it has a transparent devise and operational devise that will emanate shareholder value.
"We will continue to aggressively govern on a devise in 2012 as we continue a turnaround of AOL."
Miller Tabak researcher David Joyce, who has a buy rating on AOL, pronounced he is broadly understanding of Armstrong's devise to concentration on media and advertising. He pronounced after a formidable duration AOL's arrangement promotion business was starting to recover.
"With a arrangement ad expansion entrance by that's starting to assistance and their new increase expansion outpaced a estimates," pronounced Joyce. "There's movement building in this strategy."
Starboard was spun off from Ramius LLC in Mar 2011 and is led by Chief Executive Jeff Smith. It describes itself as a value financier focused on U.S. tiny top companies. Its investment group has formerly been concerned in shareholder activism with smaller medical and tech companies.
Shares in AOL were adult 2 percent, or 29 cents, to $15.10 in afternoon trade on a New York Stock Exchange on Wednesday.
(Reporting by Yinka Adegoke and Sinead Carew in New York; Editing by Gerald E. McCormick, Tim Dobbyn and Phil Berlowitz)
News referensi http://news.yahoo.com/investment-fund-pushes-aol-strategy-shake-185058278.html
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