Verizon Communications agreed buy Yahoo Inc.’s web assets for $4.8 billion, ending the company’s two-decade run as an independent business that took it from Stanford University startup at the dawn of the internet age to also-ran behind nimbler online rivals such as Google and Facebook.
Verizon will pay cash in a deal that includes Yahoo real estate, but excludes some intellectual property which will be sold separately. Yahoo will be left with its stakes in Alibaba Group Holding and Yahoo Japan, with a combined market value of about $40 billion.
Verizon will add Yahoo web services that still draw 1 billion monthly users, including mail, news and sports content and financial tools, gaining share in the $187 billion digital-advertising market — though it will nevertheless be a distant third behind Google and Facebook. The largest U.S. wireless carrier also gets smaller but faster-growing assets including mobile applications and advertising technology for video and handheld devices.
Yahoo will be integrated with Verizon’s AOL under Marni Walden, executive vice president of the product innovation and new businesses organization at Verizon, according to a statement Monday.
“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,” AOL Inc. Chief Executive Officer Tim Armstrong said in the statement. “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.”
The shares of the Sunnyvale, California-based company were little changed in early trading Monday at $39.11.
The deal amounts to an admission that Yahoo has lost much of its relevance as modern internet use shifts toward mobile, social networking and messaging. The “portal,” officially formed in 1995 by Stanford students Jerry Yang and David Filo, was once indispensable, serving as the on-ramp to the online world for millions of consumers just discovering the internet.
Yahoo’s decline, which began with the rise of Google as the preferred search engine for web surfers and advertisers, was hastened in the past decade by management missteps and a failure to keep up with users’ changing habits.
With annual sales forecast to drop to their lowest in more than a decade, an abandoned plan to spin off Yahoo’s valuable Asian assets, and rising pressure from investors, Yahoo CEO Marissa Mayer had no choice but to put the company’s core up for sale earlier this year. Now, Verizon must find a way to turn around a business that, even after strategy shifts and job cuts, remains bloated with costs and held back by a fragmented product lineup.
The deal also ends the turnaround efforts of Mayer, whose appointment in 2012 was lauded by Wall Street and Silicon Valley. Mayer, Google’s No. 20 employee and its first female engineer, was hailed as a potential savior for a foundering company in management disarray. This wunderkind, who gained renown for tending Google’s spartan home page, applied her engineering chops to building new products and restoring Yahoo’s long-lost technological prowess.
Speaking on CNBC, Walden said she and Armstrong planned to meet with Mayer. Commenting on the company website, Mayer said “for me personally, I’m planning to stay.”
Yahoo will change its name when the deal closes, hanging onto its cash, patents and stakes in Alibaba Group Holding and Yahoo Japan, with a combined market value of about $40 billion. The company said it will return cash to shareholders and update investors on plans for the other assets later.
