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Verizon Warns of $500M Hit From Yahoo Deal

Iain Morris
6/16/2017
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Verizon's Big Red nickname looked more fitting than ever after the US telco flashed up a warning that it would take a $500 million pre-tax hit in the second quarter following its $4.5 billion takeover of Yahoo on June 13. (See Verizon Completes $4.5B Deal for Yahoo.)

Verizon Communications Inc. (NYSE: VZ) stuck the news in a filing with the US Securities and Exchange Commission that contained more boilerplate text than detail about the costs.

"In connection with the transaction, Verizon expects to record severance, acquisition and integration related expenses of approximately $500 million pre-tax in the second quarter of 2017," said the company. "Verizon expects to realize over $1 billion in cumulative operating expense synergies from the transaction through 2020."

The charges won't send Big Red into the red -- it reported net income of about $3.6 billion in the first quarter (a fifth less than in the year-earlier period, mind) -- but they will add to the gloom that surrounds the deal.

Details of historical data breaches at Yahoo Inc. (Nasdaq: YHOO) came to light after Verizon had agreed to buy the ailing web company last year, triggering speculation that Verizon would try to back out of the deal. It ended up paying $350 million less for Yahoo than it had originally proposed.

Verizon is now combining Yahoo with AOL, another ageing web property it acquired in 2015, and has christened the new-look venture Oath.

The $500 million hit relates to plans to cut about 2,100 jobs, or about 15% of Oath's entire workforce.


For all the latest news from the wireless networking and services sector, check out our dedicated mobile content channel here on Light Reading.


Like rival operator AT&T Inc. (NYSE: T), which has its sights set on an $85 billion takeover of media giant Time Warner Inc. (NYSE: TWX), Verizon is trying to reinvent itself as a content and digital services company and even positioning Oath as an alternative to Facebook and Google (Nasdaq: GOOG). (See AT&T's $85B Time Warner Takeover Is a Media Game Changer.)

Oath's greatest assets are probably its 1.3 billion customers, who represent a potentially lucrative source of advertising revenues.

Verizon is said to be targeting about 2 billion customers at Oath by 2020.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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brooks7
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brooks7,
User Rank: Light Sabre
6/20/2017 | 11:09:53 AM
Re: More daffinitions
Dennis,

Agreed.  Customer is the wrong term.  Eyeballs is what prompted me to enter this thread.  Because essentially, that is what folks who host content sites get paid for.  The difference is that today there is a way of monetizing eyballs through ad sales.

seven

 
mendyk
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mendyk,
User Rank: Light Sabre
6/20/2017 | 9:59:06 AM
Re: More daffinitions
Especially under the ad-broker model, users are a deliverable, not a customer in the conventional sense of the word. I just think the wording in the article was questionable, but I'm not sure whether that misuse came from Verizon or the writer.
brooks7
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brooks7,
User Rank: Light Sabre
6/20/2017 | 9:53:45 AM
Re: More daffinitions
Dennis,

 

For most sites, and LR works a bit differently, ad placement is bought and sold through brokers.  They don't generally control who buys the ads.  LR seems to keep it focused on folks in the market.  That can be done via brokers as well, but to me it looks like LR sells direct.

 

seven

 
mendyk
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mendyk,
User Rank: Light Sabre
6/20/2017 | 9:34:54 AM
Re: More daffinitions
In the conventional media world, the customer is the one that pays for the ad. The reader (or user) is the deliverable to secure that business. Readers or users become customers when they pay for your service. But that's the conventional world. In make-it-up-as-you-go land, everything is subject to redefinition.
brooks7
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brooks7,
User Rank: Light Sabre
6/19/2017 | 5:53:23 PM
Re: More daffinitions
 

Well, it the same problem if you asked Google.  It is a number that we are all comfortable talking about.  At the end of the day, the questions really should be about specific parts of the business.   There will be a significant amount of advertising revenue as well as an understanding of specific content and how it fares in the market.  Is a person that looks at finance.yahoo.com and thus presented with a banner ad a customer?  Well, I don't know but Yahoo makes revenue from it.

seven

 
Duh!
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Duh!,
User Rank: Light Sabre
6/19/2017 | 5:31:32 PM
Re: More daffinitions
1.3 Billion users = 2.6 Billion eyeballs.  I'm having a '90s flashback.
mendyk
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mendyk,
User Rank: Light Sabre
6/19/2017 | 4:20:55 PM
More daffinitions
Characterizing these 1.3 billion users -- most of whom pay exactly zero to use whatever it is AOLYahooOath offers -- as "customers" is more than a bit of a stretch.
Duh!
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Duh!,
User Rank: Light Sabre
6/19/2017 | 4:07:04 PM
Oath
  1. 1a (1) :  a solemn usually formal calling upon God or a god to witness to the truth of what one says or to witness that one sincerely intends to do what one says (2) :  a solemn attestation of the truth or inviolability of one's words The witness took an oath to tell the truth in court.b :  something (such as a promise) corroborated by an oath They were required to swear an oath of loyalty. took the oath of office

  2. 2 :  an irreverent or careless use of a sacred name; broadlyswear word He uttered an oath and stormed away.

    Submitted without comment.

     

danielcawrey
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danielcawrey,
User Rank: Light Sabre
6/17/2017 | 1:17:47 PM
Re: Net Neutrality
I have to say, the name "Oath" is not a great one. 

It makes me think of the authentication standard oauth. However, I supposed as a media company that's not going to matter or have technical connotations. 
wanlord
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wanlord,
User Rank: Light Sabre
6/16/2017 | 4:51:02 PM
Net Neutrality
I am interested to see if they are still lobbying against Net Neutrality. They were against it when they were just a "fat pipe" provider, but now as a "content" provider with things like Go90 and AOL/YAHOO that serve consumers outside of their network, do they still feel the same way? Can't have it both ways!!!
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