Verizon’s Deal with Yahoo

Verizon Communications Incorporated (NYSE: VZ) announced last Monday that it would be buying the Web assets of Yahoo Incorporated (NASDAQ: YHOO) for $4.83 billion, in cash. The deal includes Yahoo’s YHOO, a small share of the company’s real estate, and -2.69% core Internet business. Yahoo will hold on to its cash reserve, its Excalibur portfolio (the company’s noncore patents), and its shares in Yahoo Japan and Alibaba Group Holding Ltd. The company will be changing its name at the closing, and will become a publicly traded investment company (registered). The deal is expected to be closed by early 2017, subject to the customary closing conditions, including Yahoo’s shareholders’ approval. 

For Verizon, the deal means a strong boost for the digital media and advertising business that it is already in the process of building. The telecom giant plans to combine Yahoo’s messenger, e-mail, and search assests, as well as its advertising technology tools, with its AOL devision. It was last year that Verizon bought AOL, for $4.4 billion. The company is hoping to attract more than 200 million visitors monthly to its Yahoo sites. Combining that with the 150 million AOL users, Verizon would be able to offer the advertisers with a more targeted service. According to Barclays, by acquiring the Internet business of Yahoo, Verizon would be able to save $500 million a year in the costs of getting Internet traffic. The deal will make the popular content sites such as Yahoo Finance and AOL’s Huffington Post bigger, and this means more investment.

The future role of Marissa Mayer, the CEO of Yahoo, is still unknown. If she is terminated because of the deal, she stands to make over $50 million in compensation, after earning more than $100 million in equity and cash. In an interview with Reuters, Mayer said that what is exciting about the deal is that it will bring Yahoo back to growth, sooner. She also said that she is open-minded about her future role in the company.

Verizon’s head of new business and product innovation, Marni Walden, is set to lead the combined internet unit. According to her, no decision has been made yet about the management team.

Yahoo was founded in the year 1994. It was a dominant player at the height of the dot-com boom, however, then it lost to Google and Facebook. As of now, Google is the dominant party in the search business, and it has an industry-leading email service as well. Social media is currently ruled by Facebook. Yahoo still manages a strong presence in the Internet world.

Leave a Comment