Verizon to Acquire Yahoo for $4.8 Billion; Mayer Will Stay on as CEO

Verizon to Acquire Yahoo for $4.8 Billion; Mayer Will Stay on as CEO

Verizon has agreed to buy Yahoo’s core business for $4.8 billion, acquiring the early Internet behemoth’s web services along with their 1 billion daily users. Yahoo’s embattled CEO Marissa Mayer is staying on, however, writing in a statement that the deal is “a great opportunity for Yahoo to build further distribution and accelerate our work in mobile, video, native advertising, and social”:

The teams here have not only built incredible products and technologies, but have built Yahoo into one of the most iconic, and universally well-liked companies in the world. One that continues to impact the lives of more than a billion people. I’m incredibly proud of everything that we’ve achieved, and I’m incredibly proud of our team. For me personally, I’m planning to stay. I love Yahoo, and I believe in all of you. It’s important to me to see Yahoo into its next chapter.

As we work to close this agreement in Q1 2017, it’s more important than ever that we come together as one global team to continue executing on our strategic plan through the remainder of the year. We have delivered the first half of the year with pride, achieving our goals. Now, it is up to us to make Yahoo’s final quarters as an independent company count. Yahoo is a company that changed the world. Now, we will continue to, with even greater scale, in combination with Verizon and AOL.

The job of integrating Yahoo with AOL, which Verizon acquired last year for $4.4 billion, will fall to executive vice president and president of product innovation Marni Walden, whose role Business Insider’s Lara O’Reilly describes as “evolving Verizon from an analog business into a firm that can battle with the digital media giants and explore new technologies like ‘the internet of things’ and telematics”:

Both Yahoo and AOL own content and advertising technology businesses, and Walden’s task will be to select the right mix of components to ensure that the merged entity works efficiently. …

With Yahoo CEO Marissa Mayer announcing that she intends to stay at the company once the deal closes, working out how Armstrong and Mayer can work together — or on who will replace Mayer — will be one of Walden’s first tasks. It comes just two years after Armstrong proposed a merger with Yahoo that Mayer rejected. So far, Walden has allowed [AOL CEO Tim] Armstrong to run the business fairly independently, but it remains to be seen what will change now that Verizon has Yahoo in its portfolio.

Bloomberg reporter Scott Moritz profiled Walden earlier this month, painting a picture of a woman poised to become Verizon’s first female CEO, provided she’s successful at integrating these acquisitions:

The 49-year-old is on a short list of candidates to potentially succeed Verizon Chief Executive Officer Lowell McAdam, 62, a position never held by a woman. … After spending $130 billion in 2014 to buy out partner Vodafone Group Plc’s stake, McAdam wanted to protect Verizon’s landline and wireless business while exploring new areas. He divided the task, naming John Stratton president of operations with responsibility for the main business. Walden was put in charge of new ventures.

“I needed to bring in some new talent, and Marni was the choice,” McAdam said. A product-development person from outside would have been an obvious choice, he said, but an insider with lots of operations skill and customer knowledge was key.

In terms of her management style, Walden “pushes her staff to be efficient, though she has a playful side”:

If someone shows up late to one of her meetings, she fires up a karaoke machine and requires the laggard to sing as punishment. The punctuality rule applies to everyone, including AOL’s Armstrong, who recalls having to sing John Denver’s “Take Me Home, Country Roads” as penance. Walden remembers it as the soft-rock standard “Feelings.”

Myles Udland at Business Insider predicts that the acquisition will result in quite a few layoffs, judging from how much the word “synergies” is being thrown around:

[I]n Verizon’s announcement of the deal, AOL CEO Tim Armstrong also uttered a word that comes up in many merger announcement and that should have Yahoo employees anxious: synergies. “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,” Armstrong said. “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.”

In corporate speak, “synergies” is often used as shorthand for layoffs. … And while not all departments at a company are likely to have redundancies that prove attractive for consolidation, words like “cost savings” and “synergies” are code for there being opportunities that investment bankers, advisers, or existing managers have identified as potentially opening the door to a leaner operation.

Vox’s Tim Lee, meanwhile, looks back at how Yahoo got to this point. One bad bet that Yahoo made long ago, he writes, was positioning itself as a media company rather than a technology company, which Lee argues was an impediment to hiring the hotshot programmers who went on to make Silicon Valley’s winners hugely successful:

The most successful companies in Silicon Valley — including Google, Facebook, and Apple — have an intensely technology-focused culture. These companies are obsessive about hiring the most talented engineers (and in Apple’s case, designers) so they can build the best technology products. And this culture tends to be self-perpetuating — very skilled, highly motivated people like to work with other very skilled, highly motivated people. Once you have a critical mass of such people it becomes easy to recruit more of them.

Yahoo never had the same kind of obsessive focus on recruiting technical talent. Paul Graham, a well-known Silicon Valley investor who sold his company to Yahoo in 1998, has written that even in the late 1990s, Yahoo was ambivalent about its status as a technology company. “One of the weirdest things about Yahoo when I went to work there was the way they insisted on calling themselves a ‘media company,’” Graham wrote. Yahoo employed a lot of programmers and produced a lot of software, of course — and still does. But it never made software as core to its identity as some of its major competitors.

That’s probably because at the time Yahoo was founded, in 1994, no one had ever heard of an ad-supported software company. Back then, software companies sold their products in shrink-wrapped boxes at Best Buy. Yahoo had the same business model as CNN and the New York Times — build up a large audience and then make money by selling ads — so it was natural for Yahoo to think of itself as being in the same industry. But one consequence of this was that Yahoo didn’t focus as much as it could have on recruiting the best programmers.