First generation web companies like AOL and Yahoo have had many missteps in keeping pace with the 2nd generation companies. Now they are turning to the assets that havent lost any value: Patents. Yahoo is taking their patents and going to war with the new web darling, Facebook, which could be a long and arduous drag through the legal system and their cash position.
AOL on the other hand took a road that investors appreciated much more with a 45% jump in their share value on the news that Microsoft will purchase 800 patents for $1.1 billion. Now a price tag of $1.1 billion is high, but why the 45% jump? The patents were originally estimated to be worth only $300m, so this was a very sweet surprise for shareholders.
In the short term, both companies will continue but in the medium to long term, well see which strategy prevails.