U.S. telecoms firm Verizon has said it will create a mobile media giant after snapping up Yahoo for $4.83bn (£3.7bn).
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The deal “presents exciting opportunities to accelerate Yahoo’s transformation”, Yahoo CEO Marissa Mayer wrote in an email to employees posted on the company’s Tumblr blog.
Shares of Yahoo gained 145 per cent under Mayer, but that was mainly due to factors she had little to do with, such as the rising value of the company’s stakes in Chinese e-commerce site Alibaba and Yahoo Japan that were acquired before Mayer arrived. “Among the many entities that showed interest in Yahoo, Verizon believed most in the enormous value we’ve created, and in what a combination could bring our users, our advertisers, and our partners”. However, he said that Verizon has not yet decided what it wants to do in search, an area where Yahoo has waged a losing fight against Google for a decade.
What is interesting about this deal is that you have a new-age tech company that was supposed to be at the cutting-edge of things being procured by what is very much an old-school phone company.
“Joining forces with AOL and Verizon will help us achieve tremendous scale on mobile”, she said.
AOL chief executive Tim Armstrong will be handed the reins on Yahoo’s websites.
Mayer’s future role with Yahoo was unclear. “I love Yahoo and am excited to see it into its next chapter”, she said during a conference call on Monday.
But it was not clear if she would remain after the transition. She would walk away with an approximately $55 million severance package if Yahoo’s sale to Verizon ousts her from her job. Investors know the bulk of Yahoo’s value isn’t about the core business. It went public in 1996 in one of the most hotly anticipated stock offerings of the time – surging 270 percent in the first day of trading.
At its peak in 1999, Yahoo was valued at more than $US109 billion, or almost triple its current value.
Yahoo remains a major force online, but has lagged its rivals in its ability to “monetize” its audience through advertising that is linked to customers’ browsing and other online activities.
Several other bidders have been in talks, according to reports, including Quicken Loans founder Dan Gilbert, who was being backed by billionaire Warren Buffett.
Why Verizon is buying Yahoo? But Armstrong could have a good skill set for Yahoo, McGrath said.
But Roger Kay of Endpoint Technologies Associates said Verizon should keep its goals more modest and may get a small benefit from the Yahoo brand. Verizon, as a data provider, can track and study its users habits and searches, and like Facebook and Google, can position itself as a better advertiser given the data they can harness from the service they provide their clients.
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Mayer has been under pressure from shareholders to “unlock” value for Yahoo, whose core business has been effectively held a zero or negative value.
