Tuesday, 26 July 2016 07:59

Yahoo takeover: Verizon buys search engine for $6.5b


Struggling internet search engine Yahoo is bought out by US telecommunications giant Verizon in a deal worth $6.5 billion.

The deal sees Verizon pay $US4.83 billion ($6.5 billion) for Yahoo's core business, excluding its successful Asian ventures - a 15 per cent stake in the Chinese online marketplace Alibaba and its 35 per cent holding in Yahoo Japan - as well as some patents.

The value of those remaining assets is estimated at around $US40 billion ($55 billion).

Verizon is expected to combine the business with the internet firm AOL, which it bought last year for $US4.4 billion ($5.9 billion).

AOL's chief executive Tim Armstrong told Bloomberg that his company had been considering a tie up with Yahoo for some time.

The logic behind the deal is to build scale to take on the might of Google and Facebook.

"We talked about ways to combine on scale, through content and ad inventory," Mr Armstrong said of his discussions with Yahoo chief executive Marissa Mayer in 2014.

"We were at about 500 million to 750 million users then. Today we are at about 1 billion users and we want to get to 2 billion in the next four years."

Mr Armstrong also said the focus of the combined business would be building on its base of existing brands, not merging everything under one banner, meaning the key Yahoo brands are likely to stay.

Yahoo 'mercy killing'

Yahoo has been on the market since February.

The company was an early internet pioneer when it was founded by Jerry Yang and David Filo as an online directory and web portal 22 years ago, but it has struggled to keep up with younger and more nimble rivals such as Google and Facebook, and the advent of social media.

Roger Entner, an analyst with Recon Analytics LLC, told Bloomberg that Yahoo had run out of options for internal revival.

It's a mercy killing. They need to get some adults in the room to run the show at Yahoo.

"The most logical way to do that is within the AOL structure."

While the core of the business is going to Verizon's AOL, Ms Mayer said she will stay on to manage the still very valuable rump of Yahoo.

Ms Mayer was brought in from Google in July 2012 to turn Yahoo around after several years of turmoil in which it burned through five chief executives in as many years.

The company has been the subject of speculation about its future as far back as 2008, when Microsoft made an unsolicited bid to buy the firm for around $US44.6 billion ($60 billion), which was rejected at the time for undervaluing the company.



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