AOL Inc. hired Evercore Partners Inc. to find a buyer for its more than 800 patents and explore other strategic options, according to three people with knowledge of the situation.

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Private-equity firms, including Providence Equity Partners Inc., TPG Capital and Silver Lake (SLR), have approached AOL about taking the company private, yet those overtures haven’t resulted in a deal, said the people, who asked not to be identified because the matter hasn’t been disclosed.

Evercore is trying to help the company wring value from a patent portfolio that AOL shareholder Starboard Value LP said may yield more than $1 billion in licensing income. AOL is exploring the options amid slow advertising growth and a decline in its dial-up Internet subscribers. The company’s revenue has dropped 29 percent since its 2009 spinoff fromTime Warner Inc. (TWX)

“It could be that someone is trying to use their patent portfolio as a life preserver,” said James Conley, a professor at Northwestern University’s Kellogg School of Management. “The cash from the dial-up business is going away, and late in the game the leadership may be realizing that, ‘Golly, we could get some money from these patents.’”

Many of AOL’s patents cover Internet advertising and communications services, and the portfolio could fetch as much as $1 billion from a large technology company, said Christopher Marlett, co-founder of MDB Capital Group, an investment bank in Santa Monica, California, focused on intellectual property.

Google, Microsoft?

“More than likely the buyer on this would be someone like Google or Microsoft (MSFT),” Marlett said. AOL’s “intellectual property could be a significant percentage of the overall value of the company,” he said.

Maureen Sullivan, a spokeswoman for New York-based AOL, declined to comment, as did representatives of Evercore, Google Inc., Microsoft Corp. and the private-equity firms.

AOL’s share price has climbed 81 percent since Aug. 10, when it reached its lowest level since the spinoff, amid speculation it might be sold to a private-equity firm. Shares of AOL rose 4.1 percent to $18.49 yesterday, giving the company a market value of $1.75 billion. AOL has become too expensive for the financing of a leveraged buyout, people familiar with the matter said.

Private-equity firms are often drawn by a company’s ability to generate cash. AOL’s appeal is diminishing as its dial-up business dries up, the people said. Sales in that division have plunged each of the past four quarters.

Shrinking Sales

The unit provided $803 million, or 36 percent, of total revenue in 2011. AOL’s fourth-quarter net income declined 65 percent from a year earlier to $22.8 million on sales of $576.8 million. In the fourth quarter of 2009, AOL reported sales of $809.7 million.

AOL’s portfolio includes “some of the foundation patents for the Internet,” Chief Executive Officer Tim Armstrong said at a Barclays Capital conference this month.

“It’s beachfront property in East Hampton,” he said. “It’s basically extremely valuable.”

Armstrong said in a December interview that he was open to going private. It “doesn’t matter” whether AOL remains public or goes private, he said. Remaining an independent entity is the “first desired course of action,” he said.

Private-Equity Talks

Armstrong had been in talks with private-equity firms before, as recently as September, when the CEO approached potential financial partners about combining AOL with Yahoo! Inc. (YHOO), two people said at the time. AOL said in August that it had retained investment bank Allen & Co. and law firm Wachtell Lipton Rosen & Katz (1347L) as advisers. Allen & Co. later gave up its mandate to be Yahoo’s adviser, said one of the people.

Starboard, which increased its stake to 5.2 percent from 4.5 percent late last year, said in a Feb. 24 statement that it’s “increasingly uncomfortable” with the direction the company and the board leadership are taking.

The investor nominated five directors — including Jeffrey Smith, Starboard’s co-founder and CEO — to AOL’s board at the time.

“We are troubled that the company remains closed-minded to alternative value creation initiatives,” Smith said in a letter accompanying the statement. AOL could exploit its more than 800 patents covering Internet technologies such as e-commerce, which may generate “in excess of $1 billion of licensing income,” he wrote.

AOL fired as many as 40 people in the group that includes its AOL Instant Messenger service, while executives Eric van Miltenburg and Jason Shellen departed, three people said earlier this month. The cuts in AIM were related to the division’s underperformance, and they could be followed by the elimination of more staff in other departments, these people said.