Verizon takes $4.6B hit
Shares of Verizon slipped before the opening bell Wednesday with the company taking a $4.6 billion hit on what’s become an expensive internet foray that’s never panned out.
In a regulatory filing late Tuesday, Verizon Communications Inc. said it will take a charge in the fourth quarter to cover weak revenue and earnings from its Oath media business. Verizon expects Oath to face continued competitive pressure and says that the benefits from integrating Yahoo and AOL with the enterprise were less than expected.
Verizon spent well over $4 billion to acquire AOL in 2015 and a year after closing the deal, said it would spend almost $5 billion to buy most of Yahoo. The price was lowered due to a pair of massive security breaches at Yahoo, but the perception that it was a lot of money to pay for the company persisted.
Verizon folded AOL and Yahoo under the Oath umbrella with hopes that it could cobble the one-time internet trailblazers into a path to profitable digital advertising.
Since that time, Google and other internet giants like Facebook have continued to gobble up advertising dollars to the detriment of Oath, and by extension, Verizon.
Oath CEO Tim Armstrong stepped down in September, though he will continue as a strategic adviser there until the end of the year.
Verizon this week said that 10,400 U.S. managers have accepted voluntary buyout offers. The New York company is making $10 billion in cost cuts, money that will be used to ramp up 5G technology investments.
Verizon is undergoing a significant restructuring under new CEO Hans Vestberg. The company said last month that it will be organized into four groups at the start of the year: Consumer, Business, Media, and Global Network & Technology.
Shares declined almost 2 per cent at the opening bell Wednesday while broader markets rallied strongly.