Verizon announced today that it will write down $4.6 billion associated with its acquisitions of AOL and Yahoo. The resulting Verizon subsidiary, called Oath, is worth a lot less than Verizon had hoped.
To be clear, these were separate purchases. Verizon acquired AOL in 2015 for $4.4 billion, a far cry from the $160 billion that AOL commanded in its early and failed merger with Time Warner. Verizon acquired Yahoo, another flailing Internet pioneer, two years later for $4.48 billion, proving that it had learned no lessons at all from the past. (Indeed, a former AOL executive championed the purchase.)
Verizon combined AOL and Yahoo into a new subsidiary called Oath whose only claim to fame was that it snuffed out two of the most important brands from the Internet boom’s heyday. The firm claimed it would be “one of the most disruptive brand companies in digital.”
It’s been nothing of the sort. Oath was as much a failure as the two turkeys that formed it, and it has seen a revolving set of executives since its inception. The $4.5 billion write-down eats up most of Oath’s $4.8 billion goodwill balance. And Verizon will reduce its headcount and revise its financial projections.
“In connection with Verizon’s annual budget process in the fourth quarter, the new leadership at both Oath and Verizon completed a comprehensive five-year strategic planning review of Oath’s business prospects resulting in unfavorable adjustments to Oath’s financial projections,” Verizon told the U.S. Securities and Exchange Commission in a recent filing.
The firm will also take a $1.8 billion to $2.1 billion hit associated with an employee buyout plan that will reduce Verizon’s headcount by over 10,000. Almost half of them are leaving this month, but the exodus will continue through June 2019, Verizon says.
Maybe Verizon should just stick to its wireless communications business.