Thursday , 19 October 2017

Home » RESOURCES » MARKET » Yahoo: Verizon Is Still the Bidder to Beat

Yahoo: Verizon Is Still the Bidder to Beat

Yahoo headquarters in Silicon Valley
ENLARGE

Yahoo headquarters in Silicon Valley


Photo:

Bloomberg News

By

Miriam Gottfried

April 11, 2016 12:56 p.m. ET

Yahoo
YHOO


0.49
%




has quickly gone from beleaguered to belle of the merger ball. But one potential buyer remains the suitor to beat.

Verizon
VZ


0.17
%




Communications plans to submit a first-round bid for Yahoo in time for the April 18 deadline, newly extended by Yahoo’s board. Other possible bidders include the U.K.’s Daily Mail & General Trust,
DMGT


0.65
%




backed by private equity, CBS
CBS.A


0.00
%




and IAC/InterActiveCorp,
IAC


0.15
%




The Wall Street Journal has reported.

The Mail is intriguing: Yahoo would fit into its broader strategy of diversifying away from print and increasing its share of non-U.K. revenues. Still, given Verizon’s heft and the intensity of its recent focus on becoming a major player in mobile advertising, the telecom giant seems most likely to emerge victorious.


ENLARGE



For Verizon, buying Yahoo would be consistent with its new mobile-video strategy. This relies on offering free content and monetizing it through advertising.

To succeed, Verizon, which purchased AOL for $4.4 billion last June, must quickly achieve mobile-advertising scale. Buying Yahoo would give it a big chunk of inventory as well as valuable ad technology.

The ability to ramp up its advertising business matters for Verizon’s growth story. Not long ago, the bull case for the company and rival AT&T
T


0.21
%




rested on the ability to grow by charging more for bigger data packages.

The U.K’s Daily Mail is in preliminary talks with other investors to launch a bid for Yahoo as the April 18 deadline nears. WSJ’s Stu Woo joins Lunch Break with Tanya Rivero to discuss. Photo: Getty

Competition in the wireless industry, spurred by an aggressive T-Mobile US,
TMUS


-0.32
%




has thrown a wrench into that plan. That has pushed the two larger telecom companies to pursue mobile video.

Unlike AT&T, which has focused on selling DirecTV to wireless subscribers, Verizon has turned to advertising. That is where Yahoo comes in.

Granted, Yahoo wouldn’t be a magic bullet. The Internet company’s earnings have been falling. It has been late to the mobile transition and got only 23% of revenue from mobile in the fourth quarter. Yahoo will command a roughly 1.3% share of world-wide mobile ad revenue in 2016 versus 2.3% for Twitter,
TWTR


-0.06
%




17.7% for Facebook
FB


0.27
%




and 33.3% for Google, estimates eMarketer.

Verizon would also have to figure out what to do with Yahoo’s stakes in Yahoo Japan
4689


-1.43
%




and Alibaba Group Holding.
BABA


0.26
%




Neither make much sense in the context of its U.S.-focused business. It is unclear whether any Verizon bid would ultimately include these.

Even so, given Verizon’s $213 billion market valuation and huge balance sheet, it is perhaps best prepared to absorb these challenges. The scenarios the Mail is mulling, which would involve a private-equity firm buying Yahoo’s U.S. operations and selling the news and media properties to the Mail or merging those properties with the Mail’s web properties, don’t appear to factor in the Asian assets.

Indeed, Verizon’s financial firepower and the costs it could theoretically cut by merging Yahoo’s operations with AOL’s should also make it easier to outbid rivals, if there are any.

Yahoo may be attracting other companies’ attention, but it remains Verizon’s to lose.

Let’s block ads! (Why?)

Receive News & Ratings Via Email - Enter your email address below to receive a concise daily summary of the latest news and analysts' ratings with MarketBeat.com's FREE daily email newsletter.

Yahoo: Verizon Is Still the Bidder to Beat Reviewed by on . ENLARGE Yahoo headquarters in Silicon Valley Photo: Bloomberg News By Miriam Gottfried Miriam Gottfried The Wall Street Journal CANCEL Biography @miriamgottfrie ENLARGE Yahoo headquarters in Silicon Valley Photo: Bloomberg News By Miriam Gottfried Miriam Gottfried The Wall Street Journal CANCEL Biography @miriamgottfrie Rating:
scroll to top