Starboard Value, the hedge fund that owns 5.3 percent of AOL (NYSE: AOL), the No. 4 website, denounced AOL's sale of its patents as inadequate Tuesday.

The sale of patents to Microsoft (Nasdaq: MSFT) for more than $1.3 billion does little to address our serious concerns with the company's poor operating performance and substantial losses, Starboard CEO Jeffrey Smith said in an open letter.

AOL shares, which jumped 43 percent Monday after the patent sales were announced, fell 6 percent to close at $24.82, down $1.58.

Smith renewed calls for a shake-up of New York-based AOL. Smith has proposed that he and four others be elected AOL directors to change course.

The Starboard Value CEO estimated that AOL's display advertising business is losing more than $500 million annually, including $150 million in its Patch local news unit.

The investor group also denounced AOL's dismal record of capital allocation and said it would return a significant portion of the patent sale proceeds to shareholders.

AOL didn't respond to the latest Smith letter.