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Seeing Some Wrinkles in Yahoo! Acquisition

After Verizon (VZ) bought AOL (AOL) last year, I said to myself (like many others probably), “which big wireless carrier is setting its sights on the other Internet company – Yahoo!?”

Could it be AT&T (T) or Sprint (S)? The last thing I thought was that Verizon would go after the failing Yahoo!, snapping up the one of the last remaining Internet providers. This is not a good year. I had sharp pains of AOL getting in over its head by purchasing Time Warner in 2000. My concerns were eased a bit when I heard that Google (GOOG) or Alphabet (GOOGL), may get in on the deal. No matter, one of the last surviving Internet providers, Yahoo!, is at the end of the days as we know it. Even Time (TIME) may throw a bid out there.

Last year, Verizon paid $4.4 billion to acquire AOL; it’s looking to pay $8.5 billion to buy the Internet portal’s stake in Yahoo Japan.

How much value can Yahoo! add

There are naturally some investors who are happy about the acquisition. However, there are some heavy hitters that support it. One of those is value investor Mario Gabelli who said on CNBC Friday said he supported a buyout of Yahoo!’s core Internet media and search business by Verizon.

Verizon has noted that the acquisition would further its strategy to build out its LTE wireless video and streaming video strategy. That could be combined with AOL’s ad technology platform, which was widely reported to be at the heart of Verizon’s bid.

Worries about add Yahoo!

Yahoo! has really had a hard time of it; despite hiring top Google executive Marissa Mayer. Since being hired in 2012, she has failed to gain positive results through several turnaround plans.

The writing about the future of the company was clearly on the wall last year. I recall a story in Bloomberg that noted Mayer wanted shareholders to wait at least another year for Yahoo! to explore and complete the spinoff of its Internet businesses as outlined Dec. 9, which was “simply unacceptable.”

Through the acquisition of Yahoo, I think Verizon is trying to gain more of a foothold in the online industry, which as you know is constantly changing. However, buying a failing business that seems to have fallen behind in the communications seems risky. And for Verizon, I anticipate struggles, because, afterall, it is a wireless carrier.

The fact that it already has a business (AOL) in its coffer’s that was ailing at the time it was purchased, means Verizon has two possibly troubled businesses.

Yahoo has pushed back the deadline for bids for the business until April 18, to give more companies to bid.

 

 

 

 

 

 





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