Verizon on Verge of $5B Deal for Yahoo Core Assets

Verizon reportedly is close to a deal to buy the core Web assets of Yahoo for US$5 billion, which would end a months-long process of jockeying over the future of the struggling company.

Verizon emerged as the winner of a lengthy bidding contest to acquire the assets, according to reports that surfaced Friday. An agreement is expected early next week. The deal itself could take six to nine months to finalize. The acquisition price is rumored to be $5 billion.

The deal would include real estate but not the company’s intellectual property portfolio, according to reports. It is unclear exactly what that would mean for Yahoo operations going forward.

Verizon had no comment on the reports, said spokesperson Robert Varettoni.

“In order to maintain the integrity of the process, we’re not commenting until we announced a final agreement,” Yahoo spokesperson Rebecca Neufeld told the E-Commerce Times.

Shareholder Pressure

The expected agreement would follow months of pressure from shareholders who expressed frustration over the lack of new product development and a long-term growth plan at Yahoo under CEO Marissa Meyer. The company fell far behind rivals including Google, Microsoft and Facebook.

Verizon was one of the first major companies to show an interest in a deal with Yahoo, as it would benefit from Yahoo’s once-powerful search engine and widely respected content operations, including a digital newsroom led by former CBS anchor Katie Couric, and sports and finance news sections that compete with some of the top media organizations in the U.S.

“If you accept the argument that the real money to be made in broadband is in the area of providing content versus being a ‘pipe’ company, for Verizon this deal is about easy access to content and a recognized brand rather than having to build the brand from scratch,” observed broadband technology analyst Craig Settles.

“For Yahoo, you get some money to keep the doors open for a few more years,” he told the E-Commerce Times.

Rival telecom firm AT&T has made its own bet on content, said Charles King, principal analyst at Pund-IT.

AT&T has taken over DirectTV, which gives it the ability to bundle video with its existing wireless, wireline and broadband business, he told the E-Commerce Times.

Content Play

Verizon reportedly has considered merging Yahoo’s content with its AOL unit to create a destination that would drive more engagement.

Yahoo has hundreds of very valuable patents involving browser and search technology, and it would be surprising if they weren’t included in an acquisition, said Michael Jude, a program manager at Stratecast/Frost & Sullivan.

“Five billion seems like an excessive price to pay for a deal that doesn’t include the intellectual property,” he told the E-Commerce Times.

Verizon’s CEO several months ago told CNBC that the company’s growth was going to be slower over the next few years, as it comes up with a growth plan, recalled industry analyst Jeff Kagan. What’s needed now is a plan to grow a newly combined company over the next few years, or Verizon’s chief will face the wrath of his own investors.

“Verizon had acquired AOL — that was not a growth story either. Now they want to acquire Yahoo, which may be as sleepy as AOL,” Kagan told the E-Commerce Times. “Unless there is something going on behind the scenes, I can’t see the value in acquiring yesterday’s technology.”

David Jones is a freelance writer based in Essex County, New Jersey. He has written for Reuters, Bloomberg, Crain's New York Business and The New York Times.

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