Tim buys time, but no peace

AOL’s $1 billion patent sale won’t buy CEO Tim Armstrong any peace.

Activist investor Starboard Capital said yesterday it will still seek board seats at the Web portal.

Starboard CEO Jeff Smith, in a statement, said that while he is “pleased” with AOL’s sale of 800 patents to Microsoft, he is still wants more control over the company’s future.

Starboard will still seek to grab five board seats in June, Smith said.

In a letter to AOL’s board, Smith, whose hedge fund owns a 5.3 percent stake in AOL, said the patent sale is “a big first step” but does nothing to address his ongoing concerns about AOL’s troubled display-ad sites such as its “hyperlocal” news network, Patch.

Not long after sending the letter, Starboard followed through with its threat and filed proxy materials with regulators asking shareholders to nominate its five directors, including Smith.

Smith told shareholders the board “has thus far been unwilling to engage with us in a constructive manner and appears to be closed-minded to considering a full range of alternatives to maximize value for stockholders.”

AOL didn’t immediately return a request for comment.

Starboard estimates that AOL’s display business is losing more than $500 million a year, including $150 million in Patch alone. In his letter to the board, Smith called Patch “an unproven and, thus far, unsuccessful business model that is draining valuable resources from the company.”

Smith also jumped on AOL for its plans to keep some of the proceeds of the patent sale, saying he worries that AOL will misspend the money given the company’s “dismal track record of capital allocation.”