What happens to Yahoo now that Verizon bought its core business?

    16

    The curtain is finally drawing to a close on Yahoo’s 22-year long run. On July 25th, Verizon announced it will buy the struggling internet company’s core business for $4.83 billion. The purchase is pennies on the dollar for a pioneer of Silicon Valley once valued at $125 billion during its heyday in 2000.

    The sale encompasses Yahoo’s core internet properties like Search, Mail, Finance, and Tumblr – along with Yahoo’s Sunnyvale real estate. What’s left out is Yahoo’s investments in Alibaba and Yahoo Japan as well as a few patents.

    So what does the telecom giant plan to do with one of the most beloved brands of the 90s tech boom? Verizon was long favored to win the auction for Yahoo’s core business as it fit squarely with their plans to grow in the mobile media and online advertising market. Verizon might be top dog in the telecommunications space but it will need the support of Yahoo’s infrastructure and 1 billion monthly active user base if it wants to go toe-to-toe against Google and Facebook in the world online advertising.

    It’s likely Verizon will merge Yahoo with AOL – another fallen tech giant they scooped up last year for $4.4 billion. The two combined create quite an impressive portfolio of content. Reputable news sites like Huffington Post, Engadget, Yahoo Finance, and TechCrunch will all fall under Verizon’s purview. And Yahoo’s billion active users per month will come in handy as Verizon seeks to build out an ad servicing network.

    “We have enormous respect for what Yahoo has accomplished: this transaction is about unleashing Yahoo’s full potential, building upon our collective synergies, and strengthening and accelerating that growth,” said AOL CEO Tim Armstrong. “Combining Verizon, AOL and Yahoo will create a new powerful competitive rival in mobile media, and an open, scaled alternative offering for advertisers and publishers.”

    As for the part of Yahoo that remains, it will be renamed RemainCo and its primary objective will be to realize the cash value of holdings in Alibaba and Yahoo Japan – worth almost $40 billion combined – as soon as possible. But it’s not clear they’ll be able to do this easily and without a tax bill as their investors had hoped.

    One possible scenario is that Yahoo Japan and Alibaba buy back Yahoo’s stakes in a way that saves on taxes. The buy back would likely come at a discount but Yahoo investors would still benefit, according to Eric Jackson, managing director at SpringOwl Asset Management LLC, which owns Yahoo shares.

    “Hopefully by the end of this year, we have some sort of transaction, preferably with Alibaba buying its stake back and Yahoo Japan buying its stake back,” Jackson told Reuters.

    Another uncertainty is the future fate of Yahoo CEO Marissa Mayer, the most recognizable of all the actors in this drama. The former Google star took over the company in 2012 amid much fanfare over a rare female chief executive of a major technology corporation. But her tenure was a tumultuous one with big bets that didn’t pay off and a continuing decline that some say was Yahoo’s inevitable fate.

    In a memo to her employees, Mayer only stated she would see the deal with Verizon through to its close estimated for Q1 2017. “It’s important to me to see Yahoo into its next chapter,” she said.

    Kelly Paik
    Kelly Paik writes about science and technology for Fanvive. When she's not catching up on the latest innovations, she uses her free-time painting and roaming to places with languages she can't speak. Because she rather enjoys fumbling through cities and picking things on the menu through a process of eeny meeny miny moe.