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Has AOL finally unloaded Bebo?

AOL may have found a buyer in a Southern California hedge fund, but at a price nowhere near what it paid for the social network in the first place--$850 million.

AOL CEO Tim Armstrong may finally have made good on his promise to figure out what to do with Bebo, the company's pricey digital albatross, by the end of the spring.

Mashable reported on Wednesday morning that Bebo had been sold; The Wall Street Journal followed up later in the day by saying that the deal is "close" but not complete and that the buyer is Criterion Capital Partners, a hedge fund based in Studio City, Calif. An AOL representative did not respond to a request for comment; a price isn't yet clear, but the Journal noted that Criterion's buys tend to be in the $3 million to $30 million range.

That's a big drop in valuation. AOL acquired Bebo for $850 million early in 2008, when the social network was still a hot commodity among teenagers in several European countries, and when it was still possible that having a social-media property in-house could help it gain international reach as well as potentially rival Facebook. Bebo had over 40 million members at the time and looked like it was poised to keep growing, but the deal is now considered to have been wildly overpriced and now short-sighted as Facebook continued to eat up more and more market share.

Not all executives even liked the Bebo deal in the first place, rumors indicated. A year later, continued management shakeups at AOL led to the hire of former Google sales executive Armstrong as CEO, and Armstrong immediately started repositioning the company as a next-generation publishing house, not a communications and access company. Two months ago, AOL sold its ICQ chat property to Russian investment firm Digital Sky Technologies.

Since his installation as CEO, in public appearances Armstrong has repeatedly admitted that the deal was botched and reminded critics that he wasn't yet at the company when it went through. In April, the company confirmed that if a buyer could not be found by the end of May the social network would be shut down.

Sources have indicated that AOL considered the possibility of shutting down Bebo to be a serious last resort: Shutting down the site would have been expensive, and could have resulted in even more unfortunate press for the company than a quick deal to get it off its hands.