Expert: Verizon buy could pay off for Yahoo shareholders
Verizon's $4.83 billion deal for Yahoo could offer a financial parachute to investors who have stuck with the one-time search engine heavyweight as it watched companies like Google and Facebook comfortably pass by, according to an expert.
“This is maybe the best way out if you have held Yahoo stock for a long time,” said Peter Ireland, an economics professor at Boston College.
“Verizon's stock has done very, very well this year. It's a safe stock, and that's what people have been looking for. Maybe trading Yahoo stock for Verizon is a good deal,” said Ireland.
The Yahoo deal is the second purchase of a former dominant internet company. Last year, Verizon purchased AOL — once the go-to internet service for millions of Americans — for $4.4 billion.
“We have enormous respect for what Yahoo has accomplished: This transaction is about unleashing Yahoo's full potential,” AOL CEO Tim Armstrong said in a 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,” said Armstrong.
Yahoo CEO Marissa Mayer said in a statement that she is “planning to stay. It's important to me to see Yahoo into its next chapter.”
However, the move could force Verizon to lay off Yahoo employees to eliminate overlapping jobs and services in Yahoo and AOL. Yahoo has already laid off 1,900 workers since last September.
Yahoo will fold in with Verizon's AOL under Marni Walden, executive vice president of the product innovation and new businesses organization at Verizon.
The immediate effect on Verizon — one of the largest telecommunications companies in the world — will be minimal, according to Ireland.
“In the overall scheme of things, this is a small-time thing,” Ireland said. “There is upside potential for them, however. If they can put the pieces together, it should add an element of excitement surrounding the company.”
Yahoo's stock fell $1.06 Monday to close at $38.32. That is just a small fraction of Yahoo's stock price in the late 1990s and early 2000s, when the company that was operating with nearly no real competition in the search engine realm.
Yahoo was created in 1995 by Stanford students Jerry Yang and David Filo and was the go-to search engine for millions of Americans learning how to browse the internet. Its mass ive rise was stymied by the emergence of Google, which today is selling for $757.52 a share.
Mayer, 41, a former top dog at Google, was brought in to give Yahoo a fighting chance against its former rivals. But the company's annual revenue has declined by about 20 percent from $4.4 billion before her arrival to a projected $3.5 billion this year.