Verizon to spend $4.83B in cash for Yahoo; CNN poll’s big post-convention bounce for Trump
Morning Brief: Deal means Yahoo’s core assets will now be split off from its Alibaba stake, and combines two early Internet leaders, AOL and Yahoo, likely under Tim Armstrong’s leadership
Somebody was going to buy Yahoo, the only question was who. Was it really going to be one of the legacy media companies that liked to float the rumor in order to maintain the facade that they were still big players, one of the telecoms such as Verizon which had picked up AOL a year ago, or a private equity firm.
It could be a legacy media firm as they don’t have the cash, and it couldn’t be a PE firm because there simply were not profitable parts that could be disposed of. The left Verizon, and that is who acknowledged buying Yahoo. The price, $4.83 billion, represents a good multiple if you like to look at revenue, not so good from a multiple of net income (in that case Yahoo would have to pay its buyer to take it).
“Just over a year ago we acquired AOL to enhance our strategy of providing a cross-screen connection for consumers, creators and advertisers,” said Lowell McAdam, Verizon Chairman and CEO in this morning’s announcement. “The acquisition of Yahoo will put Verizon in a highly competitive position as a top global mobile media company, and help accelerate our revenue stream in digital advertising.”
Everything that the public thinks of when they think of Yahoo is being sold to Verizon. What is left is actually the valuable part, Yahoo’s stake in Chinese internet company Alibaba, worth about $8.7 billion.
“Yahoo is a company that has changed the world, and will continue to do so through this combination with Verizon and AOL,” said Marissa Mayer, CEO of Yahoo, who will now get a big payout and retire to someplace nice and never be heard from again except when mentioned at some political fundraiser. “The sale of our operating business, which effectively separates our Asian asset equity stakes, is an important step in our plan to unlock shareholder value for Yahoo. This transaction also sets up a great opportunity for Yahoo to build further distribution and accelerate our work in mobile, video, native advertising and social.”
What this means for Yahoo is that it is essentially to be merged with AOL, under the leadership of AOL chief executive Tim Armstrong. One might think of the deal this way: there is not likely room in the world for two old Internet brands like AO: and Yahoo, so now there might be only one, and the one left standing is the one that invested more heavily in analytics and ad technology.
“We have enormous respect for what Yahoo has accomplished: this transaction is about unleashing Yahoo’s full potential, building upon our collective synergies, and strengthening and accelerating that growth. 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,” Armstrong said.
“Unfortunately ‘Alliances of the Weak’ in an attempt to make a single strong competitor very rarely work,” said John Colley, of Warwick Business School, a Professor of Practice in the Strategy & International Business group. “They are usually left with a bigger ‘weak’ player. This seems likely with this tie-up in a market in which the ‘winner takes all’. If you are not in the top two then unless you have a credible niche you will suffer. Yahoo have struggled to gain traction and recent results have been particularly disappointing. Why should Verizon and the addition of AOL change that?”
Americans watched the Republican convention, with its constant drumbeat of negativity and said what? Apparently, they said “we love it!” because the newest CNN poll gives Donald Trump a big post-convention bounce with Trump up 5 points over Hillary Clinton in a four-way matchup including Gary Johnson and Jill Stein.
But convention bounces used to be the norm for a while, but lately the electorate appeared more locked in with their choices.
The Democratic convention official kicks off today, but yesterday things already were heating up when it was announced that Debbie Wasserman Schultz will step down as the chairwoman of the Democratic National Committee following the release of emails that appeared to show the DNC putting their fingers on the scales in favor of Hillary Clinton.
The emails, released by WikiLeaks last week, simply was the excuse to finally dump the chairwoman who many blame for the party’s poor performance in state elections. Schultz, who is also Representative for Florida’s 23rd congressional district, was seen as a loyal ally of the payday loan industry, and seen as out of step with prevailing party attitudes – for instance, when she fought hard against a medical marijuana initiative in her home state.