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Verizon CEO Lowell McAdams last week confirmed that his company was exploring an acquisition of some of Yahoo’s assets, which would be placed under the corporate umbrella of Verizon’s AOL unit.
McAdams discussed Verizon’s interest in an interview with Mad Money host Jim Cramer.
Giving AOL CEO Tim Armstrong control of some of Yahoo’s assets would be good for investors if a deal could be struck at the right price, McAdams said.
Addressing concerns over integrating Yahoo and AOL, McAdams was upbeat.
Verizon already has seen US$300 million in incremental revenue as a result of feeding information about its mobile subscribers to AOL, he pointed out.
Verizon spokesperson Bob Varetonni declined to provide further details.
Finding Light in the Darkness
CEO Marissa Mayer’s plan to make the struggling company more relevant through a string of acquisitions appears to have failed. Yahoo earlier this month announced a restructuring, including layoffs. The board of directors indicated it would consider strategic alternatives — basically offering a corporate calling card for suitors interested in entering an alliance, or acquiring the company or some of its assets.
The restructuring included the sale of nonstrategic assets that could generate up to US$1 billion in cash, as well as a $400 million reduction in operating expenses by the end of 2016. The company will continue its efforts to drive growth in mobile, video, native and social media.
Those categories accounted for $1.6 billion in GAAP revenue in 2015, representing a 45 percent year-over-year increase, according to Yahoo. The core products include Yahoo mail, Tumblr and the Yahoo search engine.
Also key to Yahoo’s strategy are its four verticals — news, sports, lifestyle and finance — which are strong in growth markets including the U.S., Canada, UK, Germany, Hong Kong and Taiwan.
“Yahoo seems to be in freefall, despite the continuing efforts and investment strategy,” said Charles King, principal analyst at Pund-IT.
“Mayer has become a target for some of her actions and attitudes, but I think it’s important to ask her critics what they would have done differently,” he told the E-Commerce Times.
Still, there seems to be a consensus that Yahoo has been very late to the game in undertaking a transformation that would allow it to compete against 21th century social media and search engine rivals including Facebook, Google and Instagram.
One of the Yahoo’s last major technology plays was the introduction of an updated version of its Messenger app, which is designed to support photo sharing and online chat. Investors were cool to the announcement, viewing it as confirmation that company had lost too much ground.
Yahoo spokesperson Rebecca Neufeld declined to comment for this story.
Verizon Sees Gold
Verizon must have awakened one day and said, “you can never have enough advertising revenue,’” quipped independent analyst Craig Settles. “Either that, or they couldn’t stand the possibility that AT&T would take it and maybe get a marketing edge in some way.”
Yahoo is “not the company in ascendancy” that AOL was when Verizon bought it, he told the E-Commerce Times, so Verizon must believe the acquisition might come cheap.
Other telecom companies have benefited from ownership of content providers, noted Kevin Krewell, principal analyst at Tirias Research. Comcast is one example, having profited from its acquisition of NBC Universal.
“The Yahoo purchase would likely roll up under AOL,” he said, “giving Verizon an even larger user base.”
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