Biz Break: Verizon speaks up with $4.8 billion Yahoo buy

Top Of The Order:  

Can You Hear Me Now?: Verizon might not be bringing back that old commercial campaign, but for almost $5 billion, the nation’s largest wireless telecom company is saying it wants, and expects to be heard, with its purchase of Yahoo.

OK…Technically, Verizon isn’t purchasing all of Yahoo. Whatever independent form of “Yahoo” remains, it will still hold on to the company’s stake in Yahoo Japan and Alibaba Holdings. But for all practical purposes, Yahoo, and everything that everyone thinks that Yahoo is, is about to become part of Verizon.

What does this mean for Verizon? John Hodulik, of UBS, says the initial connections between Verizon and Yahoo are “pretty clear.”

Hodulik points to Verizon’s Go90 app as Exhibit A of where Yahoo might fit. Verizon launched the video platform app last fall in an effort to grow something that can compete with the likes of Facebook and YouTube. And since we are talking about Go90 now…Yeah, I hadn’t heard of it either, much less seen anything from its video platform.

Hodulik said that by acquiring Yahoo, Verizon gets access to more than 1 billion monthly active Yahoo users, including 600 million who use Yahoo’s mobile platforms. When that number is paired with the 700 million users that AOL — another one-time internet star that Verizon acquired — that comes to 1.3 billion users, or more than half of what AOL Chief Executive Tim Armstrong said the company needs to remain “relevant.”

But, by most measures, Verizon is rolling the dice on Yahoo. For years, Yahoo tried pretty much anything and everything (Buying Tumblr for $1.1 billion. Hiring Katie Couric as its global news anchor. Streaming a Buffalo Bills-Jacksonville Jaguars NFL game) to revive its status. Yahoo still brings in around $5 billion in annual revenue, but growth has been anemic, at best.

“Trends at Yahoo have been difficult, with the company losing share of mobile ad dollars to the heavyweights, Hodulik said, referring to Google and Facebook. Hodulik also pointed to UBS research that estimates Yahoo’s revenue will fall 14 percent this year, and said that “this deal will barely move the growth or margin profile of Verizon,” even though it could lead to earnings gains over time.

The Merc’s Ethan Baron takes a deeper look at the nuts and bolts of the deal and what it means for Yahoo. And columnist Michelle Quinn says it’s a shame that the company, which for millions of people was their first gateway to the world of the internet, had to turn out this way.

In the meantime I have two burning questions on the matter:

  1. Although she says she is “planning to stay,” what are the Vegas odds on how soon Yahoo Chief Executive Marissa Mayer leaves with her $55 million exit package?
  2. Where in the world is Yahoo co-founder and board member David Filo? He’s only the single-largest shareholder in the company. Maybe he’s still sleeping under his desk and nobody wanted to wake him? David, if you have something to say about what was your baby, feel free to call me at 408-278-3415.

Middle Innings:

Well, That Was Fun: Hey, remember how over the last couple of weeks there was a ton of talk about Nintendo’s stock going through the roof in Japan, where it is traded, due to all the success of Pokémon Go? I’m not sure of the exact amount, but I think it rose somewhere between “a whole lot” and “eleventy bazillion percent.”

Uh…

So much for all that. Last Friday, Nintendo shares fell 18 percent, the stock’s biggest one-day decline since 1990. And the reason was Pokémon Go. The game publisher said that all of the big business gains expected to come from Pokémon Go would be limited in scope since it owns what is being called an “effective economic stake” in Pokémon Go developer Niantic, as well as the Pokemon Co. itself of just 13 percent.

To make matters worse, Nintendo said it has already factored in revenue from its own Pokémon Go accessory, Pokémon Go Plus, into its annual estimates.

Bottom Of The Lineup: 

Here’s a look at how some leading Silicon Valley stocks did Monday…

Movin’ On Up: Gains came from NeoPhotonics, Advanced Micro Devices, Oclaro, Pandora Media and Rocket Fuel.

In The Red: Decliners included Glu Mobile, Yahoo, 8×8, Aviat Networks and QuinStreet.

The tech-focused Nasdaq Composite Index slipped by 2 points to 5,097.

The blue chip Dow Jones Industrial Average gave up almost 78 points to close at 18,493.

And the broad-based Standard & Poor’s 500 Index ended the day down by 6.5 points at 2,168.

Quote Of The Day: “I’ve learned that only one team will treat you the best, and that’s your first team. I’m damn proud to be a Seattle Mariner.” — Ken Griffey Jr., who on Sunday was enshrined in the Baseball Hall of Fame after receiving the largest Hall of Fame vote percentage in history: 99.32 percent.

Sign up for the 60-Second Business Break newsletter at www.siliconvalley.com.

Photo: In this Jan. 7, 2014 file photo, Yahoo president and CEO Marissa Mayer speaks during the International Consumer Electronics Show in Las Vegas. (AP/Julie Jacobson)

 

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