Telecommunications company Verizon will acquire Yahoo’s core internet business and other minor assets for about $5 billion in cash, signaling the potential end to what was once a massive Internet giant. Will the Verizon acquisition help Yahoo or hurt Verizon?
According to Marketwatch, the deal is expected to expand Verizon’s attempts to build its own digital empire and is expected to pass all hurdles by early 2017. Verizon already purchased AOL a year earlier.
The purchase price is just another symbol of how far Yahoo has declined since its height in the 1990s and early 2000s. Yahoo was founded in 1994 and was worth as much as $140 billion at the height of the dot-com bubble.
The Internet in that period was a chaotic place as users had little idea of where to find websites on any specific topic. Yahoo thus functioned as an orderly repository where users could find the latest news, check e-mail, and conduct all of their business on one page.
But Internet users now have separate pages for separate topics such as Facebook for social events and LinkedIn for professional socialization, and Yahoo failed to innovate and figure out what it wanted to be. And that was on top of its stupendous blunders in its decisions to not buy Google in 2002 and Facebook in 2006.
A string of uninspiring CEOs ran Yahoo after founder Jerry Yang resigned from the position in 2008. Current CEO Marissa Mayer’s most notable move was to purchase social media company Tumblr for $1.1 billion, but that acquisition appears to have been a failure as Yahoo wrote down Tumblr’s goodwill value in February.
It should be noted that the acquisition does not mean that Yahoo Mail, Search, and all of its other functions will be gone. As the New York Times noted, Verizon intends to keep Yahoo Mail separate and Verizon CEO Tim Armstrong that Verizon will be investing in Yahoo.
And while Verizon will purchase Yahoo’s core businesses, it will not purchase Yahoo’s major stakes in Chinese retailer Alibaba and Yahoo Japan. Those stakes actually account for the majority of Yahoo’s value, but that part of the company will rename itself and morph into a publicly-traded investment company.
Yahoo has not done well. It remains to be seen if Verizon can do any better.