Activist Fund Slams AOL’s Strategy

A little-known activist fund, Starboard Value LP, has trained its guns on AOL Inc., arguing that the Internet company’s strategy of investing in Web content businesses isn’t paying off for investors.

Starboard — one of AOL’s largest shareholders, owning about 4.5 percent of the stock — sent a letter late Tuesday to AOL Chief Executive Tim Armstrong, saying the company’s efforts to transform itself into an advertising-supported online media entity, from its roots as a subscription-based dial-up Internet access business, are destroying shareholder value.

The nine-page letter to AOL, which was reviewed by The Wall Street Journal, echoes the frustration of many AOL investors and Wall Street analysts, who have been skeptical of the company’s multiple turnaround strategies amid a nearly 70 percent drop in the stock price this year. However, it stops short of suggesting that AOL sell money-losing assets or pursue alternatives such as a sale.

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