The price tag: $1.056 billion in cash.

"This is a valuable portfolio that we have been following for years and analyzing in detail for several months," said Brad Smith, general counsel and executive vice president of Legal and Corporate Affairs at Microsoft. "AOL ran a competitive auction and by participating, Microsoft was able to achieve our two primary goals: obtaining a durable license to the full AOL portfolio and ownership of certain patents that complement our existing portfolio."

Creating Shareholder Value

After AOL inks the deal, the Internet company will continue to hold a sizable patent portfolio -- more than 300 patents and patent applications crossing technologies including advertising, search, content generation and management , social networking, mapping, multimedia and streaming, and security. As part of the deal, AOL also received a license to the patents being sold to Microsoft.

"The agreement with Microsoft represents the culmination of a robust auction process for our patent portfolio," said Tim Armstrong, AOL's chairman and CEO. "We continue to hold a valuable patent portfolio as highlighted by the license we entered into with Microsoft. The combined sale and licensing arrangement unlocks current dollar value for our shareholders and enables AOL to continue to aggressively execute on our strategy to create long-term shareholder value."

Netscape IP Involved?

We asked Charles King, principal analyst at Pund-IT, to chime in on Microsoft's billion-dollar buy. As he sees it, there's typically not much meat to pick off the carcass of a company that has been circling the drain as long as AOL has. But Microsoft sees some tasty bits left over, especially related to online transactions and communications.

"All Things Digital is claiming that a lot of the Netscape IP that AOL purchased when the browser-maker gave up the ghost in 1998 is included in this deal as well," King said. "Although according to AllThingsD, AOL is going to retain the brand name and the ISP and URLs for Netscape."

If the AllThingsD blog report is accurate, King said, there is irony in the fact that a company that was almost entirely responsible for Netscape going under -- that company being Microsoft -- is now purchasing what's left of the intellectual property. Nearly a decade ago, Microsoft paid AOL $750 million as part of its historic antitrust judgment.

"When AOL bought Netscape back in 1998 they paid about $4.2 billion. That was when a billion was real money," King said.

"I am sure that they've realized some financial benefits from the IP and those holdings over the years. But from a real dollar perspective, they paid $4.2 billion and they've gotten just under $2 billion from Microsoft for that investment."