Yahoo – AFP,
Sophie Estienne, with Rob Lever in Washington, July 25, 2016
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Yahoo will become a separate investment company, changing its name after
the acquisition by Verizon of its core assets (AFP Photo/Justin Sullivan)
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Yahoo
sealed a deal Monday to sell its core business to telecom giant Verizon for
$4.8 billion, ending a two-decade run as an independent company for the
internet pioneer.
The
agreement announced by the two companies after months of negotiations comes
following a years-long decline for the iconic firm that introduced many people
around the world to the internet.
Verizon
chief executive Lowell McAdam said Yahoo would be integrated into its recently
acquired AOL unit to create "a top global mobile media company, and help
accelerate our revenue stream in digital advertising."
The acquisition,
expected to close in early 2017, pending shareholder and regulatory approval,
will exclude Yahoo's cash, certain patent holdings, and its big share in
China's Alibaba Group and stake in Yahoo Japan.
The deal
will, however, turn over the popular Yahoo News, Mail and other online services
used by more than a billion people worldwide.
Marissa
Mayer, CEO of Yahoo, said in a statement: "Yahoo is a company that has
changed the world, and will continue to do so through this combination with
Verizon and AOL."
She told a
conference call that Verizon "offers significant strategic alignments in
Yahoo's focus on informing, connecting and entertaining our users."
She added
that the agreement is "an exceptional outcome for Yahoo shareholders"
and that Verizon was chosen because it "believed in our vision the
most."
With the
sale of its core, Yahoo will be left as a separate investment company and
change its name after the transaction.
Yahoo
shares fell 2.7 percent after the long-expected deal was announced. Verizon
lost 0.4 percent.
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Yahoo
President and CEO Marissa Mayer hails "an exceptional outcome
for Yahoo
shareholders"
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Bringing
synergies
The deal
comes with Yahoo, a onetime leader in the online space, coping with years of
decline and struggling to keep up with rivals like Google and Facebook.
Yahoo will
operate independently until the acquisition and then fall under the aegis of
the AOL unit chief, Tim Armstrong, a former Google colleague of Mayer.
Mayer's
future role with Yahoo was unclear.
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."
But it was
not clear if she would remain after the transition. According to documents
filed with regulators this year, Mayer would get a severance package of $55
million if removed within a year of a change of control.
Mayer
arrived in 2012 from Google seeking to revitalize Yahoo, which at its peak had
a market value of over $100 billion.
The company
was founded in 1994 by two Stanford University students, Jerry Yang and David
Filo, as "Jerry and David's Guide to the World Wide Web." 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.
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.
Research
firm eMarketer estimated that Yahoo's share of the digital advertising market
would fall this year to around 1.5 percent, with Google getting some 30 percent
and Facebook 12 percent.
Several
other bidders had been in talks, according to reports, including Quicken Loans
founder Dan Gilbert, who was being backed by billionaire Warren Buffett.
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Verizon
chief executive Lowell McAdam says Yahoo will be integrated into its
recently
acquired AOL unit to create "a top global mobile media company"
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Verizon
strategy
But Verizon
appeared to be the leading candidate because of its ability to integrate AOL's
advertising technology into Yahoo services.
Technology
analyst Jack Gold of J. Gold Associates said the deal makes sense with telecom
companies such as Verizon and AT&T seeking to move beyond their role as
carriers.
Verizon, he
said "is looking at ways to stay competitive primarily with AT&T"
and that Yahoo gives it "the ability to expand into the online content
arena" and a large base of users.
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.
"I
don't think they have enough juice to take down Google and Facebook," Kay
said.
With better
operating efficiencies and lower costs, "they'll be lucky if they get
their money back" from the deal, he said.
Some
analysts said Verizon is likely to keep the Yahoo brand, which is recognized
globally and used by about a billion people.
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