Verizon, the Manhattan-based telecommunications giant, is having a banner year this year, with its stock rated as the third-leading issue on the Dow Jones average, up 17 percent for 2016.
It’s beating its competitors Sprint and T-Mobile as well as cable giant Comcast and making a name for itself with its industry-leading FIOS Internet and cellular phone services. Performance-wise, it’s slightly trailing former parent company AT&T.
But Verizon’s healthy stock dividend of 4.2 percent makes it very attractive to investors both individual and institutional, especially in an environment where worries about issues like Brexit and negative global central bank interest yields have some speculators turning to more conservative outlets with their funds.
Another positive point Verizon has in its favor is that it recently settled a long-running contract dispute with the company’s landline workers who had been on strike. However, fallout from that action and sluggish sales have cut analysts’ expectations for the firm for the quarter and the year.
That means that an acquisition of Yahoo — a money-losing has-been in the Internet world — would be a drag on the company. Even if Verizon succeeded in merging Yahoo with the firm’s earlier acquisition, America Online (AOL) and eliminating all redundancies, there are many that argue that Yahoo’s price is simply not worth the assets it would provide.
As a brand name, Yahoo represents nearly the bottom of the barrel for many Internet users, and investments and acquisitions of the troubled company, led by much-profiled CEO Marissa Mayer, have not paid off or generated expected new profits.
In fact, search colossus Yahoo has been a poster child for a lot of what can go wrong at a high-tech company when poor management decisions and sloppy hiring practices are combined with negligent board oversight.
Never a high-tech leader, Yahoo tried to buy its way into leadership positions in different niches with high-profile acquisitions of Flickr, Tumblr, BrightRoll, Broadcast.com and more than a hundred other companies. Nearly all these purchases shed value and users in the wake of their buyouts.
There was one notable exception for Yahoo, white-hot Chinese wholesaler AliBaba. In fact, numerous business analysts say it’s only Yahoo’s stake in the latter venture that’s keeping the company afloat, and that the entirety of Yahoo is actually worth less than the company’s share in the Chinese concern if it was sold independently.
A number of Yahoo’s critics claim that Yahoo has been very poorly managed. Given more than four years to reverse the company’s downward slide, CEO Mayer has made bad decision after bad decision, indulging in pet projects and surrounding herself with sycophants as income has plunged, lowering the company’s morale.
SunTrust Robinson Humphrey analyst Robert Peck wrote, “I don’t know if I can think of a company that’s spent that much capital to have it be that unproductive.” Many experts agree the highest value that could be assigned to Yahoo can only be realized by selling off its individual assets.
Some industry observers contend that the current leader of AOL (and former colleague of Mayer’s at Google), Tim Armstrong, might be able to turn around the search firm’s prospects, but that’s a tall order for someone whose performance at the former TimeWarner subsidiary so far has been termed “erratic,” according to the Wall Street Journal.
At the same time, insiders credit Armstrong, who’s led AOL for the last six years, with boosting the firm’s income. AOL success is the result of a newfound focus on advertising and mobile channels over original content, such as that of The Huffington Post, which AOL hastily acquired for $315 million in 2011.
Certainly, Armstrong is one of those who’s been pushing the hardest for his parent company to pull the trigger on Yahoo. The latter firm’s billion users would enable Verizon to take on behemoths Facebook and Google in terms of ad revenue and allow it to be a real competitor instead of an oft-derided niche player.
If Armstrong was able to lead a newly merged entity to prominence, it would be a real feather in his cap, and possibly cement a path to assuming the leadership of Verizon itself.
One fact in the whole business is not in doubt, however — if an acquisition does take place, the person who will almost certainly not benefit will be Yahoo CEO Mayer, who nearly every industry commentator says would be let go nearly instantly from the resulting combination.
No doubt, Mayer has a healthy golden parachute in place for such an eventuality, but this development would likely be a low point of the formerly high-flying (and current highest-paid) female CEO’s career.
Regards,
Ethan Warrick
Editor
Wealth Authority
