Seeking a wider digital audience, Verizon is buying Yahoo for US$4.83 billion ($6.89b) in a deal that marks the end of an era for a company that defined much of the early internet but struggled to stay relevant in an online world dominated by Google and Facebook.
It’s the second time in as many years that Verizon has snapped up the remnants of a fallen internet star. The nation’s largest wireless carrier paid US$4.4b for AOL last year. The two brands will be rolled into the same operation.
“We have enormous respect for what Yahoo has accomplished: This transaction is about unleashing Yahoo’s full potential,” said AOL chief executive Tim Armstrong.
Despite Yahoo’s travails, its operations are a prize for Verizon, which wants to capitalise on the growing number of people living their digital lives on smartphones. The company already profits from the data plans that connect more than 100 million people and their devices to the internet. Now it’s making plans to control more of the advertising on those devices.
Most analysts expect the deal to end the four-year reign of Yahoo chief executive Marissa Mayer, who flopped in her much-watched attempt to turn around the company that was once a titan valued at US$130b.
However, Mayer told employees in an email that she intends to stay “to see Yahoo into its next chapter” without specifying for how long. In a later interview she said it’s too early to know whether there will still be a desirable role for her after Yahoo and AOL are combined.
“It would be premature and presumptive of me to discuss what Verizon may or may not want to do. I will be open-minded,” said Mayer, who could receive a severance package valued at US$55m if she leaves following the sale.
Verizon did not discuss Mayer’s future or its long-term plans for Yahoo.
Shareholders fed up with a steep downturn in the company’s revenue over the past eight years pressured Yahoo to part with its email service and websites devoted to news, finance and sports, in addition to its advertising tools.
The slump deepened even as advertisers poured torrents of cash into what is now a US$160b market for digital advertising, according to research firm eMarketer.
But most of that money has flowed to Google and Facebook, two companies that eclipsed Yahoo during its long slide from a sensation to a dysfunctional also-ran.
The sale could result in thousands of layoffs as Verizon eliminates overlapping jobs. Mayer has already jettisoned 1900 Yahoo workers since last September.
The deal does not include Yahoo's stake in Chinese firm Alibaba and Yahoo Japan, together worth around US$40b.
The merging of Yahoo’s online operations with AOL’s sets up a potential reunion between Mayer and Armstrong, who were both executives at Google for years. Until the sale is done, Yahoo’s users should not see any major changes in mobile apps or websites. —AP
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