Verizon buys Yahoo’s core businesses for $5 billion, Marissa May

By Kyle Wiggers

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Internet behemoth Yahoo has been marching steadily toward the sale of its core assets for the last several months, and now, the sale is complete, with Verizon serving as the buyer. Verizon officially confirmed the deal, with its Chairman and CEO Lowell McAdam stating, “Just over a year ago we acquired AOL to enhance our strategy of providing a cross-screen connection for consumers, creators, and advertisers. The acquisition of Yahoo will put Verizon in a highly competitive position as a top global mobile media company, and help accelerate our revenue stream in digital advertising.”

In a separate statement of her own, Yahoo CEO Marissa Mayer has assured employees that despite the acquisition, she’s not going anywhere … yet. This contradicts previous reports suggesting that Mayer would be granted a $57 million exit package. “I’m incredibly proud of everything that we’ve achieved, and I’m incredibly proud of our team,” said Mayer. “For me, personally, I’m planning to stay. I love Yahoo, and I believe in all of you. It’s important to me to see Yahoo into its next chapter.”

The purchase has been a long time coming. Yahoo signaled its intention to sell its digital business — which includes its advertising platform, news websites, email service, and the social network Tumblr — earlier this year, after deciding against spinning the division out into a separate company. Since then, Yahoo has been approached by a broad range of suitors including news stalwarts CBS, The Daily Mail, News Corporation, and Time Inc; content giants Comcast and Disney; technology firms Google, Alibaba, and Microsoft; and a nearly endless list of private-equity and venture capital firms.

While Yahoo met with Dan Gilbert, CEO of Quicken Loans, and a group of investors as recently as last Thursday, and reportedly entertained offers from private-equity firm TPG, that potential deal and others were dropped in favor of Verizon. Back in December, the carrier’s chief financial officer, Fran Shanmo, expressed a willingness to consider buying Yahoo’s business.

Related: Get fired and earn $55 million: A day in the life of Yahoo CEO Marissa Mayer

The prime draw is Yahoo’s lucrative media and advertising properties. Yahoo Japan, a sprawling Asian culture web portal that’s the product of a joint venture between Yahoo and Japanese internet company SoftBank, has been appraised at nearly $9 billion. Yahoo’s various internet ventures, meanwhile — which include search, Yahoo Mail, and online publications like Yahoo Tech and Yahoo Finance — are worth an estimated $5 billion to $8 billion. And despite a dip in net revenue this year, Yahoo’s advertising division remains one of the largest and most profitable on the web: This year, it’s projected to generate $2.83 billion and command a 1.5 percent share of the online ad market.

Verizon has long been rumored as a potential purchaser. In recent years, the company, which derives most of its profits from mobile and land-line internet subscriptions, has attempted to diversify. It purchased media company AOL for $4.4 billion in 2014, a deal that included The Huffington Post and tech blog Engadget. And it launched Go90, a mobile video service aimed at a “younger demographic,” in October of last year.

Related: Twitter, Yahoo reportedly considered what would have been a blockbuster merger

According to Recode, Verizon intends to merge Yahoo and AOL’s advertising networks to challenge rivals like Facebook and Google. It will face an uphill battle — AOL had an estimated 3.3-percent share of the ad market in 2016, compared to Google and Facebook’s combined 64 percent — but Verizon executives are reportedly bullish on the resiliency of Yahoo’s brand and built-in user base. The company’s Mail service alone has more than 280 million users, and it retains a 12.6-percent share of the desktop search market in the U.S.

For Yahoo, the sale is part of what CEO Marissa Mayer called a “multiyear transition” to a “more focused” operation as the company struggles to rebound from years of unprofitability. Yahoo’s web properties, which collectively remain among the most visited in the United States with more than 200 million monthly visitors, reported an 11 percent year-over-year decline in revenue during the company’s most recent earnings call. Yahoo laid off 1,000 employees, or about 10 percent of its workforce, in the first quarter of this year.

Analysts blame much of Yahoo’s recent travails on its failure to transition to mobile. In the first quarter of 2016, the company made just $250 million in revenue from smartphone and tablet users. Facebook, by comparison, made $4.5 billion in the fourth quarter of 2015.

Related: Yahoo becomes the first company to disclose secretive national security letters

Ballooning costs didn’t help. Thanks to such investments as $20 million for rights to the National Football League’s first streaming-only game broadcast (the Buffalo Bills versus the Jacksonville Jaguars) and the $160 million acquisition of shopping site Polyvore, the company’s expenses climbed an average of 21 percent in 2015.

Perhaps unsurprisingly, more cost-cutting is in the company’s future. Future downsizing will include selling off Yahoo’s real estate in Burbank and Santa Clara, California, Dubai, and Milan; unloading unused patents; and shuttering up to seven digital publications in categories like parenting, food, and travel. And the company intends to lay off 15 percent of its 11,000 staffers in the coming months.

What’s not for sale, however, is Yahoo’s most lucrative asset — stock in internet retailer Alibaba. The company paid $1 billion for a 30-percent stake in the company in 2005, half of which it returned in 2012. But the company’s remaining investment has paid dividends: It’s now worth north of $25 billion.

Yahoo’s board sees its core business sell-off as a springboard for revitalization.

Updated on 7-25-2016 by Lulu Chang: Despite Verizon acquisition, Yahoo CEO Marissa Mayer said to be staying put.

Previously updated on 7-24-16 by Lulu Chang: Verizon buys Yahoo’s core business for $4.8 billion.

This article was originally posted on Digital Trends

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