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Yahoo – a buyout of $4.83 billion by Verizon explained

Yahoo - a buyout of $4.83 billion by Verizon explained
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Verizon Communications, the US telecom giant, has bought Yahoo’s search and advertising operations for $4.83 billion.

Back then during the time of the dot-com bubble, Yahoo did not offer too many services, but it made an impact. While Yahoo Search may have not been on everyone’s bookmark list, Yahoo Mail was. Add to this Yahoo Messenger which many could not do without. Yahoo did well and valued at more than $100 billion at its 2000 peak. The company turned down a $45 billion offer from Microsoft in 2008, only to sell to Verizon this week for less than $5 billion.

Yahoo currently has $7.7 billion in cash, in addition to the $4.8 billion it will receive at the close of the deal, which it plans to return to shareholders, Yahoo executives said.

Verizon prevailed over rival bidders, including AT&T Inc; a group led by Quicken Loans founder Dan Gilbert and backed by billionaire Warren Buffett; private equity firm TPG Capital Management LP; and a consortium of buyout firms Vector Capital and Sycamore Partners.

Yahoo’s shares fell to $1.06 following the announcement of the deal. A reason could be that the headline sales price is lower than expected $6 billion.

Yahoo has been failing on its purpose as a content platform, then what value add does it bring on the table? Notably, Verizon plans to use Yahoo’s content, and leverage its strength in distribution to create better, more valuable ads.

Verizon is in a process of building a portfolio of online content. Its current assets include Huffington Post and TechCrunch and its own mobile video app, called go90. Acquiring this giant web portal will bring in millions more Yahoo’s loyal viewers as today Yahoo is an agglomeration of tenuously related properties that include Tumblr, Flickr, and a bunch of sites and services whose names start with Yahoo: Mail, Search, News, Groups, and Finance, to name a few.

Verizon, by virtue of owning the infrastructure that hundreds of millions of people rely on to connect to the internet, has the ability to track users’ online behavior perhaps even more broadly than Google and Facebook do—including their location. Combine Verizon’s tracking abilities with Yahoo and AOL’s audience and ad technology, and you have the makings of a potential powerhouse.

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ayushi jain

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