New York: Yahoo! Inc. agreed to sell its main web businesses to Verizon Communications Inc. for $4.8 billion, ending a two-decade run as an independent company that took it from Stanford University start-up at the dawn of the internet age to also-ran behind nimbler online rivals such as Google and Facebook Inc.
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 Ltd. and Yahoo Japan Corp., 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. The largest US wireless carrier also gets smaller but faster-growing assets including mobile applications and advertising technology for video and hand-held devices.
Yahoo will be integrated with Verizon’s AOL under Marni Walden, executive vice president of the product innovation and new businesses organisation 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 line-up.
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 saviour 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.
In the late 1990s, Yahoo was the site where many people learnt how to navigate the World Wide Web by serving up links from a handy search box and aggregating news and other content from disparate sources. The company went public in 1996 at $13 a share, part of a wave of internet IPOs that included Netscape Communications Corp., Excite Inc. and Lycos Inc. Its stock more than doubled in its first day of trading, buoyed by optimism that the internet would someday become a meaningful advertising medium.
As the web expanded to become a central way people communicate and do business in the new century, traversing its breadth became more difficult, and Yahoo sought to fold in more products and features. That gave an opening to another Stanford company, algorithm-based web-query start-up Google, which brought fresh thinking to search and a focus on technology that could scale with the Internet’s expansion — and make money by more precisely targeting advertising based on users’ searches. Consumers soon began to shift to Google, and by 2005 it surpassed Yahoo in overall sales.
“It lasted a whole hell of a lot longer than I thought it would,” said Paul Saffo, who teaches forecasting at Stanford, noting that Yahoo was also held back by poor leadership over the years. “It made some right moves, but it could never get ahead of the curve.”
An acquisition of Yahoo could have happened sooner. The most high-profile bid came in 2008 when it failed to consummate a potential purchase by Microsoft Corp. The software giant offered more than $45 billion for Yahoo, but then-CEO Yang eventually rebuffed the deal as too cheap. Today, the company is worth less than $38 billion, including its valuable Asian assets.