Ver­i­zon gives up on dreams for fad­ing AOL, Ya­hoo


NEW YORK Ver­i­zon Com­mu­ni­ca­tions Inc. is con­ced­ing de­feat on its cru­sade to turn a patch­work of dot-com-era busi­nesses into a thriv­ing on­line oper­a­tion.

The wire­less car­rier slashed the value of its AOL and Ya­hoo ac­qui­si­tions by US$4.6 bil­lion, an ac­knowl­edg­ment that tough com­pe­ti­tion for dig­i­tal ad­ver­tis­ing is lead­ing to short­falls in rev­enue and profit.

The move will erase al­most half the value of the divi­sion it had been call­ing Oath, which houses AOL, Ya­hoo and other busi­nesses like the Huff­in­g­ton Post.

“The hype of Oath has been over for some time,” Wells Fargo an­a­lyst Jen­nifer Fritzsche said in a note Tues­day. She likened the write­down to “rip­ping off the Oath band-aid.”

The episode of­fered a sil­ver lin­ing for in­vestors. Rather than at­tempt a megadeal like AT&T Inc.’s US$85bil­lion ac­qui­si­tion of Time Warner Inc., Ver­i­zon only spent about US$9.5 bil­lion in the past three years buy­ing fad­ing web gi­ants. Though the bet hasn’t paid off, it at least stum­bled on a smaller scale.

The re­vi­sion of the Oath divi­sion’s ac­count­ing leaves its good­will bal­ance — a mea­sure of the in­tan­gi­ble value of an ac­qui­si­tion — at about US$200 mil­lion, Ver­i­zon said in a fil­ing Tues­day. The unit still has about US$5 bil­lion of as­sets re­main­ing.

Oath was the vi­sion of for­mer Ver­i­zon ex­ec­u­tive Tim Arm­strong, who had pur­sued a turn­around at AOL be­fore the telecom­mu­ni­ca­tions gi­ant ac­quired the busi­ness. But Arm­strong stepped down from his po­si­tion as CEO of Oath in Oc­to­ber, shortly af­ter Hans Vest­berg be­came chief ex­ec­u­tive of Ver­i­zon.

The car­rier is mak­ing other cuts. Ver­i­zon an­nounced this week that 10,400 em­ploy­ees, or about 6.8 per cent of its staff, had ac­cepted vol­un­tary buy­outs as part of a belt­tight­en­ing cam­paign.

That will re­sult in a charge of as much as US$2.1 bil­lion, which will be off­set by a US$2.1-bil­lion tax ben­e­fit in the fourth quar­ter, the com­pany said Tues­day.

Ver­i­zon in­vestors seem re­lieved to put the write­down be­hind them. The shares rose 1.6 per cent to US$59.20 on Tues­day, bring­ing them to a nearly 12 per cent gain for the year. That com­pares with a 22-per-cent de­cline for AT&T, its chief ri­val in wire­less ser­vice.

The com­pany sig­nalled last month that it was shift­ing away from us­ing the Oath brand, which has been heck­led on so­cial me­dia. The divi­sion was re­named Ver­i­zon Me­dia Group/Oath un­der a new struc­ture.

While the idea of build­ing a new me­dia ven­ture from a pile of on­line scraps might have held some al­lure, it was never go­ing to trans­form the tele­com gi­ant, said Walt Piecyk, an an­a­lyst with BTIG LLC.

“Even if Ver­i­zon’s move into me­dia was wildly suc­cess­ful, it was hard to see how it could move the nee­dle at a com­pany dom­i­nated by wire­less,” Piecyk said.

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