Verizon completed the takeover of Yahoo

This week, Yahoo Inc., a pioneer of commercial Internet, ended up in the portfolio of telecommunications company Verizon Communications Inc. The takeover of the holding company that owned the most visited site in the United States, many call the end of the era. JD Hancock / Flickr / CC



Yahoo Takeover


On June 13, it became known that the transaction was officially closed. Yahoo’s assets, including news, sports, financial sites and other related services, will join Verizon’s portfolio as a subsidiary under the new name Oath. It will be led by Tim Armstrong, the former CEO of AOL Media Holding. Oath brings together over 50 media and technology brands, including the popular online edition of the Huffington Post.

The cost of the acquisition of Yahoo is $ 4.48 billion. This is $ 350 million less than the original amount. The reason for the change in conditions was a series of scandals that have accompanied Yahoo recently.

Yahoo Takeover History


A prerequisite for the purchase of Yahoo was the acquisition of Verizon by AOL in 2014 for $ 4.4 billion. Thus, the company indicated its willingness to expand media assets. Yahoo at that time also established itself as a media organization. Following the deal with AOL, Fran Shammo, chief financial officer of Verizon, in 2015 during a media conference hinted at the company's interest in Yahoo.

“All that I can say now, we do not know what the board of directors of Yahoo will decide. It is too early to talk about it, ”he said then. And a year later (in June 2016) Verizon announced plans to acquire Yahoo’s core Internet business for $ 4.8 billion.

At that time, and until the end of the transaction, the president and CEO of Yahoo was Marissa Mayer. In July 2016, she expressed her willingness to remain in office after the completion of the transaction, but now leaves the company with a "gold parachute" in the amount of $ 186 million. It was her decisions and actions that led to a drop in Yahoo's valuation over the past year.

In the photo: Marissa Mayer TechCrunch CC

The reason was the public disclosure of a number of incidents that occurred several years earlier. At first, in September 2016, Yahoo representatives announced that during a hacker attack in 2014, personal information of at least 500 million users of the company's services was stolen. Verizon spokesman Bob Varettoni made it clearThat this information was an unpleasant surprise for the holding. According to Yahoo, it was possible to detect traces of hacking only in the summer of 2016. The scale of the leak was noted even at the level of the US Senate.

It soon became clear that the information disclosed could cause a change in the terms of the transaction. But a little more than two months passed, and in December Yahoo had to admit a much more serious blunder in the security system. In December 2016, it became known that a billion accounts were hacked in 2013. These two attacks are the largest known hacks of the network of one company.

Verizon was not long in coming, confirming that these events had a “significant” impact on Yahoo’s business valuation and the terms of the transaction would be reviewed. Verizon originally requested a discount of $ 1 billion, but then the size of the discount was reduced to $ 350 million.

Yahoo sunset reasons


Yahoo was launched in 1994 by David Filo and Jerry Yang. At its peak, the company was valued at $ 125 billion. It was the "golden age" of Yahoo. Management at that time even had ambitions to acquire Google, but already in 2008 Microsoft was offering $ 44.6 billion for Yahoo. From the position of 2017, this proposal can be considered profitable, however, it is obvious that the company experienced a catastrophic depreciation. As a rule, he is associated with a managerial crisis.

At the time of negotiations with Microsoft, Jerry Young himself was at the helm of Yahoo. He replaced Terry Semel after severe recessions in financial statements. In its proposal, Microsoft added an additional $ 5 billion to the company's market valuation, but Young requested another $ 5 billion. Then Steve Ballmer stopped the negotiations. In the same year, amid the financial crisis, Yahoo stocks plummeted. By the end of 2008, the company was worth less than half what Microsoft was prepared to pay earlier.

In the photo: Jerry Young Yahoo CC

Yahoo's earnings continued to fall, also under the control of Carol Bartz. The main problem was the tensions between her and Jack Ma, the head of Alibaba, a significant stake in which at that time belonged to the company.

Bartz was succeeded by former PayPal president Scott Thompson. His service lasted only 4 months, during which he managed to take part in scandals with falsification of his resume and hit even harder on the financial condition of Yahoo. It was he who made the fateful decision to sell a 20 percent stake in Alibaba. This deal cost Yahoo $ 54 billion. A stake in Alibaba was bought in 2005 for $ 1 billion.

After that, Marissa Mayer becomes the head of Yahoo. With her filing, the company's focus has shifted towards the media. For this, about 50 assets were acquired, including the Tumblr social blogging platform for $ 1.1 billion. However, since its leadership since 2012, there have been no positive changes in Yahoo’s profit. This is partly due to the lack of a unified development strategy for Marissa. The scandals with hacker attacks that fell on the period of her work, finally reduced the value of the company.

Why does Verizon need Yahoo?


“Closing this deal represents an important step in developing the global perspective that our digital media company needs,” said Marni Walden, Verizon’s President for Product Innovation and New Ventures. “The combined Verizon and Oath asset portfolio: from VR to AI, from 5G to IoT [...] will create exciting new ways to reach audiences from around the world.”

She kept the same line in an interview with WSJ, which was recorded between two scandals with hacker attacks.

AOL CEO Tim Armstrong said last year that potential profit is not a major aspect of the merger. The main goal is to expand the presence of AOL and Yahoo in the digital advertising market. While Facebook and Google dominate it now, Yahoo and AOL are seriously behind the leaders. The combination of assets will help the holding pick up about 5% of the market with further expansion of its share.

Hacking millions of Yahoo accounts should have led to a serious outflow of users. Considering that without them all assets depreciate, Verizon holding had every reason to refuse the transaction. The reason why this did not happen, according topeople familiar with the issue is the result of an internal investigation. It showed that only the "minimum" number of active users refused services after the publication of information. However, some of the company's services remain extremely popular, such as the postal service.

Thus, Yahoo’s next reputational crisis (this time fatal) proved useful to Verizon. The media assets and services audience of the search market pioneer were interested in the telecommunications company and, obviously, fit into its development strategy for several years, and the drop in price became an additional advantage in the final takeover of Yahoo.

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