Verizon buys Yahoo

Verizon buys Yahoo

After months-long many layoffs and long bidding process, Verizon buys Yahoo which owns TechCrunch and AOL is officially obtaining Yahoo’s core business in cash for $4.83 billion, that includes mobile activities, content, search and Yahoo’s advertising.

Verizon Chairman and CEO Lowell McAdam told in the release that “Just over a year ago, we obtain AOL to enhance our strategy of providing a cross-screen connection for consumers, creators and advertisers.” “The acquisition of Yahoo gives Verizon a greater competitive position as a top global mobile media company, and help accelerate our revenue stream in digital advertising.”

Yahoo Japan and Yahoo’s stakes in Alibaba are not part of the acquisition. The stakes worth is tens of billions of dollars alone. The stake of Yahoo-Alibaba is 15 percent represented worth $31.2 billion and it is 34 percent of Yahoo Japan was worth $8.3 billion as of July 22nd on Friday. The patent portfolio of Yahoo is worth around $1 billion, either is not the part of the sale. A source told TechCrunch is  Yahoo’s Sunnyvale headquarters treated as part of the acquisition.

Yahoo will be integrated with Verizon EVP and AOL and New Businesses organisation Marni Walden leads the process and President of the Product Innovation. Though AOL CEO Tim Armstrong mentions Marissa Mayer in his memo. ” Personally,  I  am planning to stay.  I love Yahoo as well as I trust all of you. For me it is soo important to see Yahoo’s next chapter,” Mayer wrote in an internal Yahoo memo. The transaction is guessed to close in Q1 2017.

Marissa Mayer told in the release that “Yahoo company changed the world and continue to do through this combination with AOL and Verizon. Our operating business sale is an important way in our plan to unlock shareholder value for Yahoo,”  that effectively divides our Asian asset equity stakes.” This transaction accelerates our works in video, mobile, native advertising and social and also sets up a great opportunity for Yahoo to build further distribution. AOL and Yahoo made popular the email, Internet, search and real-time media. As we enter our next chapter concentrated on the profiting scale on mobile. We have a loyal, terrific, quality and  experienced team and I could not be prouder of our goals to date. Our new lines  of business, including building worth to $1.6 billion in GAAP revenue in 2015. I’m happy to extend our momentum through the transaction.”

Verizon acquired AOL for $4.4 billion to energize its media and advertising businesses in last year. Instead, the acquisitions of AOL and now Yahoo show that the company needs to diversify its revenue and operations then Verizon remains a giant telecom company.

Once if the deal ends, Verizon needs to combine AOL  and Yahoo to form bigger media and advertising subsidiary. Through this, AOL reaches enough internet and gets more scale and mobile users to become an advertising giant reaches hundreds of millions or billions of people even.

As we noted last week when reports emerged that a deal was imminent, AOL has been preparing for this integration process for months already. It is a sizeable integration process, and the company seems to need to hit the ground running when it comes to combining the two teams.

Especially, Verizon needs to compete with Google and Facebook when it comes to advertising. Online advertising is at present dominated by the two Silicon Valley-based companies. Verizon needs to become the third way.

This isn’t the first time the telecom company is looking at ways to provide and operate more than dumb pipes for computers and mobiles. Verizon now needs to manage what’s going through these pipes. And the company is investing a lot of money in this venture.

AOL CEO Tim Armstrong told in the release that “Our AOL mission is to build brands people love and we’ll continue to invest in and grow them. Yahoo is a long time investor in important content and created some of the most loved consumer brands in key categories such as sports, finance, and news.” This transaction is about unleashing Yahoo’s building upon our collective synergies, accelerating that growth, full potential and strengthening. “We have enormous respect for what Yahoo has accomplished. The combination of Yahoo, AOL and Verizon creates a new powerful competitive rival in scaled alternative offering, an open, and in mobile data for advertisers and publishers.”

If the acquisition is approved by the regulator, Verizon faces two challenges now. First, the integration process is tough. By comparison, AOL has 6,800 employees. Yahoo said its headcount stands at 8,800 employees and 700 contractors in its most recent earnings call. So combining the two big teams with thousands of employees will not be a small feat for everyone who ever included in this. Second, Yahoo has been losing a bit of money. Verizon needs to change Yahoo into money making, profitable company or else it hurts AOL’s bottom line.

Verizon names a few reasons that justify an acquisition in the official announcement. Yahoo has a global audience of more than billion users including 600 million on mobile. The company owns premium brands in news, sports and finance. Yahoo Mail consists of 225 million monthly active users. When it comes to advertising analytics and technology,  Verizon named BrightrollFlurry and Gemini. On Interest, Verizon did not mention  Tumblr.

In February and after years of turmoil, Yahoo announced officially that it was exploring acquisition offers. After a month, saying that the whole board should be replaced and both the board and the management team were dragging their feet on the acquisition process, the activist investor Starboard wrote a controversial letter.

In between the lines, you can see that Starboard needed to sell Yahoo as quickly as possible and increase the acquisition price. On concord Yahoo CEO Marissa Mayer  saying that she could turn the company around in five to seven years and  kept giving interviews.

In July 2012, When Marissa Mayer joined Yahoo, she had huge plans to make Yahoo relevant again. She doubled down on mobile, acquired Tumblr for $1.1 billion, made dozens of acquire-hires, revamped key products, acquired Brightroll for $640 million like Flickr, Yahoo Mail, Yahoo Messenger and Yahoo Weather.

On Concord, all of these modifications, didn’t really boost the company’s bottom line, leads today’s acquisition.

From the day one, while Verizon has been the most likely buyer, other potential buyers included a private equity group led by TPG, AT&T and an investor group led by Dan Gilbert of Quicken Loans. Verizon holds a call in a little bit more than an hour with extra details on the transaction. Verizon’s stock is flat i.e. +0.21 percent in pre-market trading following the news. The deal initiated leaking on Friday and the shareholders anticipated today’s announcement.

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