Yahoo will be combined with AOL, another faded Internet star that Verizon bought previous year.
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It will pay just $4.83 billion (4.4 billion euros) in cash.
Yahoo will be rolled into Verizon’s AOL operations and CEO Marissa Mayer might be reunited with AOL CEO Tim Armstrong. Even though they would likely buy back these shares at a discount, Yahoo investors would benefit, according to Eric Jackson, managing director at SpringOwl Asset Management LLC, which owns Yahoo shares.
“Our mission at AOL is to build brands people love, and we will continue to invest in and grow them”, Armstrong said in the statement.
It also ends a turnaround effort by Marissa Mayer, who joined Yahoo four years ago and promised to revitalize the company.
She told a conference call that Verizon “offers significant strategic alignments in Yahoo’s focus on informing, connecting and entertaining our users”.
In an email to employees, she wrote that “I’m planning to stay It’s important to me to see Yahoo into its next chapter”.
The deal is worth $4.8 billion.
Yahoo Inc., once a Silicon Valley legend and Web pioneer, will turn into an investment company with a different name at closing of its deal with Verizon Communications Inc. These are not included in Yahoo’s deal with Verizon.
Mayer’s future role with Yahoo was unclear.
The sale potentially could result in thousands of layoffs. Yahoo has already laid off 1,900 workers since last September. She would walk away with an approximately $55 million severance package if Yahoo’s sale to Verizon ousts her from her job. “Yahoo humanised and popularised the Web, e-mail, search, real-time media, and more”, she said. It didn’t recognize the importance of social networking and was slow to make the leap into mobile devices like smartphones and tablets. Yahoo’s market value consisted nearly entirely of its Asian investments.
The writing has been on the wall for Yahoo for some time, with reports coming in thick and fast last week that the business was set to name a buyer imminently.
Yahoo, founded in 1994, was a dominant player in the early days of the internet, but has long lost its leadership position in internet search and advertising to Google, Facebook and others. Yahoo has a 15 per cent stake in Alibaba and over one-third stake in Yahoo Japan, which are together valued at about $40 billion.
“The Yahoo brand still holds a lot of consumer-affinity” and could help Verizon overcome the lukewarm feelings that many subscribers have toward their wireless service providers, said Forrester Research analyst Shar VanBoskirk.
With the sale of Yahoo! Mobile revenue at $378 million lagged behind the company’s desktop revenue of $875 million in the second quarter.
Australia’s top-rating free-to-air television network Seven West Media, which has an online joint venture with Yahoo, said it will consider “various options” if its 50:50 digital partner gets sold.
Still, others questioned whether combining AOL and Yahoo – two tech companies past their prime – will create a powerhouse that can now challenge the dominant companies in digital advertising.
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Verizon, the No. 1 United States wireless operator, has in recent years looked to mobile video and advertising for new sources of revenue in an oversaturated wireless market. The deal with Verizon – which should be completed by next year – will now end Yahoo’s existence as an independent company.
