Verizon Communications is finally getting Yahoo's internet services, giving the telecommunications giant access to hundreds of millions of users, while closing a chapter on the iconic web portal as a stand-alone business after coming under sharp criticism in recent years.
The companies officially closed the $4.5 billion agreement Tuesday following Yahoo shareholder approval last week. Yahoo properties including Sports and Finance will become part of a new Verizon unit called Oath, which is home to brands like AOL, TechCrunch and the Huffington Post. Oath will be overseen by former AOL Chief Executive Officer Tim Armstrong, while Yahoo CEO Marissa Mayer, 42, is stepping down.
Verizon — which acquired AOL two years ago and started an online video application — is building what it hopes will become a leading digital service that supplements its core business of helping consumers send and receive information on their devices or watch television channels. While the agreement was announced last July, the deal itself was in jeopardy after Yahoo disclosed two massive security hacks that exposed user accounts and threatened its trust with consumers, eventually slashing the deal's price by $350 million.
"The close of this transaction represents a critical step in growing the global scale needed for our digital media company," said Marni Walden, Verizon president of media and telematics, in a statement.
What remains of Yahoo after the sale includes an approximately 15 percent equity stake in China's Alibaba Group Holding; about 36 percent in Yahoo Japan; cash and marketable debt securities; certain minority investments; and Excalibur, which owns some patent assets. That collection of Yahoo assets will be renamed Altaba Inc. Thomas McInerney, who will remain on the board, becomes Altaba's CEO.
During a presentation last month, Armstrong, who joined Verizon with the AOL deal, said the company will have about 1.3 billion customers. He sought to position the new entity as an alternative to online consumer behemoths that include Alphabet's Google and Facebook. Verizon has now spent more than $9 billion on the combined assets, including AOL.
Still, there will be trimming to do. The combined businesses are expected to shed about 2,100 jobs with the close of the deal, a person familiar with the matter said last week. The cuts — about 15 percent of the combined workforce — will be mostly for duplicate jobs, so engineering positions are less likely to be affected, the person said.
"We're building the future of brands using powerful technology, trusted content and differentiated data," Armstrong said in the statement.
For Yahoo, the move ends the Web pioneer's days as an independent company after helping introduce a generation of users to the internet beginning in the 1990s. Its success came under pressure with rise of Google and other web properties that attracted consumers around the world — and the advertising dollars that came with them.
"While reaching this moment has certainly been a long road traveled, it marks the end of an era for Yahoo, as well as the beginning of a new chapter — it's an emotional time for all of us," Mayer wrote on her blog. "Given the inherent changes to my role, I'll be leaving the company."
Mayer arrived in July 2012 from Google to great fanfare, as the latest in a string of leaders and amid expectations that she could spur a turnaround. She pushed Yahoo into more mobile services, started new video content services and tried to attract better talent to improve products. But that never translated into much sales growth — and early last year the company began entertaining offers that led to the Verizon deal.
Mayer was the fourth-highest-paid U.S. woman executive in 2016 with $32.8 million for the year she orchestrated a sale of the firm to Verizon. The board withheld her 2016 bonus after it was revealed that hacks of the web portal had exposed hundreds of millions of users' personal information.
"Yahoo's mistakes took a while," Stephen Beck, founder and managing partner of management consultancy cg42. "While Marissa certainly made some mistakes, Yahoo's problems existed before she took over."
The agreement with Verizon had been expected to be completed in the first quarter. However, in January the company delayed closing to meet certain conditions following the admission of privacy breaches.
Now, Yahoo — which has competed with AOL in the past — becomes part of a telecommunications company. Together, Armstrong would like to reach 2 billion users by 2020.
One key area for the combined companies is video services that could help attract users on phones and tablets that use Verizon's networks. In the past, Yahoo has offered sports, news and comedy programs to pull in more viewers. It's hardly clear if it will be a success.
"Verizon is trying to bring function to the dysfunctionality of Yahoo and AOL," said Peter Csathy, founder of Creatv Media, a business advisory and investment firm focused on digital media. "They're all hoping the sum to be greater than the whole of its individual parts."