Verizon to buy Yahoo’s core business
SAN FRANCISCO — Yahoo was the front door to the web for an early generation of internet users, and its services still attract 1 billion visitors a month.
But the internet is an unforgiving place for yesterday’s great idea, and on Sunday, Yahoo reached the end of the line as an independent company.
The board of the Silicon Valley company has agreed to sell Yahoo’s core internet operations and land holdings to Verizon Communications for $4.8 billion, according to people briefed on the matter, who were not authorized to speak about the deal before the planned announcement this morning.
After the sale, Yahoo shareholders will be left with about $41 billion in investments in the Chinese e-commerce company Alibaba, as well as Yahoo Japan and a small portfolio of patents.
That compares with Yahoo’s peak value of more than $125 billion, reached in January 2000.
Marissa Mayer, Yahoo’s chief executive, is not expected to join Verizon, but she is due to receive a severance payout worth about $57 million, according to Equilar, a compensation research firm.
Verizon and Yahoo declined to comment on the deal.
Founded in 1994, Yahoo was one of the last independently operated pioneers of the web.
Many of those groundbreaking companies, like the maker of the web browser Netscape, never made it to the end of the first dot-com boom.
Verizon, one of the nation’s biggest telecommunications companies, plans to combine Yahoo’s operations with AOL, a longtime Yahoo competitor acquired by Verizon last year. The idea is to use Yahoo’s vast array of content and its advertising technology to offer more robust services to Verizon customers and advertisers. Bloomberg first reported the price of the transaction.
Ms. Mayer, who was hired as Yahoo’s chief executive four years ago but failed to halt its decline, was nevertheless rewarded handsomely for her efforts. Including the severance, she will have received cash and stock compensation worth about $218 million during her time at Yahoo, according to Equilar’s calculations.
“The deal speaks to a clear strategy shift at Verizon,” Craig Moffett, an analyst with MoffettNathanson, said Sunday. “They are trying to monetize wireless in an entirely new way. Instead of charging customers for traffic, they are turning to charging advertisers for eyeballs.”
Yahoo gained 1.4 percent to close at $39.38 on Friday after Bloomberg News reported it was closing in on a deal with Verizon. Shares of Verizon advanced 1.3 percent to $56.10.
The deal comes about two years after Starboard Value LP began campaigning for changes at Yahoo. In September 2014, it pushed Mayer, who was a little over two years into leading a turnaround, to merge with AOL Inc. She didn’t oblige. In February, facing continued pressure, the company said it was considering a sale.
In some ways, a takeover of Yahoo by Verizon would finally give Starboard what it wanted because the telecom giant acquired AOL last year. Back then, Starboard saw combining the two flailing Web portals as a way to cut $1 billion in costs. AOL’s advertising technology, which has improved under CEO Tim Armstrong, can now better leverage Yahoo’s “reasonably strong” content for mobile devices, Moffett said.