Adhering to reports that have been flooding in, Verizon is all set to buy the fallen giant Yahoo. However, the actual deal may be slightly less than the expected $5 billion. According to a report in WSJ, Verizon has finalized the deal at $4.8 billion. The companies can make the announcement as early as on Monday before the market opens for trading.
Eversince Yahoo officially went on sale in April, Verizon has remained as a frontrunner to acquire its business. Verizon will acquire core internet business of Yahoo in addition to its real estate assets.
Yahoo will retain its shares in Alibaba Group Holding Ltd. and Yahoo Japan Corp. These are approximately valued at $40 billion. Notably, Yahoo CEO Merissa Meyer had tried spinning off these shares initially. But she failed to do so after an unfavorable tax ruling from the Internal Revenue Service.
After the deal, it is unlikely that Meyer will continue to work with Verizon. Several reports suggest that she will get a severance package of $57 million if she is no longer a part of the company.
The rise and fall of Yahoo
It won’t be an exaggeration to say that Yahoo was once a formidable internet giant. With a valuation of more than $125 billion (at present stock market valuation is $38 billion), Yahoo was a household name, at least wherever there was internet. This was during the famous dot-com era in the late 90s.
However, after the dot-com crash and rise of Google and Facebook ,Yahoo struggled to revamp itself with time. It tried recovering from it through introducing several new changes and even acquired the then popular platform like Tumblr.
That $1 billion acquisition largely failed as Yahoo later wrote down its value by $230 million in February and by another $482 million earlier this month. Although it still sees a decent number of visitors to its content platforms ( Yahoo News, Yahoo Sports, Yahoo Finance), it is nowhere near Google or Facebook.
On top of all this, the financial numbers of the company have been disappointing investors regularly for quite some time now. More recently, it posted 19 percent year-over-year decline in revenues.
What it means for Verizon
On the other hand, Verizon plans to further strengthen its digital media and advertising business with Yahoo’s acquisition. Verizon has a core business in wireless communication which is largely slowing down, and is hence eyeing new-age, future-ready businesses in the field of digitalisation.
It has hence set its eyes on having a major share of online content and eventually global advertising industry currently led by Google and Facebook.
Last year, it had acquired AOL for $4.4 billion for similar purposes. That acquisition had brought popular media platforms like Huffington Post and Techcrunch under Verizon’s purview. In addition to it, Verizon also got access to video content and programmatic advertising of AOL.
Similarly, content and media platforms of Yahoo will help Verizon in further strengthening its hold in online media and digital advertising. From the data acquired from smartphones into AOL and digital advertising systems of Yahoo, Verizon can effectively compete with advertising giants like Google and Facebook.