Tech History Broken As Yahoo Sells To Verizon For $5 Billion

Yahoo was once considered to be a king of sorts when it came to the internet.

It was seen as a behemoth worth $125 billion and comparable to the greatness that Google and Facebook are engaging in today.

However, it is now being sold to Verizon for mere change.

As shown below, the speculation that preceding the deal led to an increase in value for the shares around Yahoo:

Yahoo made an announcement on Monday Morning regarding their future.

There had been a long and tedious process, but it had finally concluded with the decision to sell Yahoo’s core operating business to Verizon for just under $5 billion in cash.

Though it came after Yahoo had created a mess of their doing and were attempting to extricate from it, this transaction, unfortunately, marks the end of the independence of one of the most iconic pioneering companies in Silicon Valley.

Marissa Mayer, the seventh, as well as final, CEO of Yahoo, is reported to depart following the conclusion of the deal.

She will receive a severance pay worth upwards of $50 million.

The sale with Verizon will cause Yahoo to unite with another fallen internet king.

Last year, Verizon bought AOL for $4.4 billion, making it their first web portal purchase.

The largest wireless provider in the United States is betting almost $10 billion that the combination of these two formerly dominating websites will raise it above expectations in both mobile content and advertising technology that can be used to gain leverage with over 140 million subscribers.

Marissa Mayer  announced the news through an email and said that the deal would not only lead to a significant step towards creating a separation between the operating business of Yahoo and Asian asset equity stakes, but it would also create exciting and new opportunities that would speed up Yahoo’s transformation.

She also mentioned that though many separate entities expressed an interest in Yahoo, Verizon was the company to show the most belief in the value that everyone at Yahoo created.

Verizon also revealed that they believed in the power a combination could offer their advertisers, partners, and users.

To focus on Yahoo offers the bigger story today when you think about how it completely squandered its enormous head start by allowing every new wave of technology sweep past it, whether it be in search, mobile, or social.

Compared to what it was ten years ago, Yahoo seems to have remained the same company for the most part as a portal used by hundreds of millions of people all around the world.

Their users rely on Yahoo for a majority of tasks, including basics like news and weather, as well as critical functions that include email or searching.

When the word became indulged in the universe of smartphones and mobile apps, the advantage that Yahoo had held over the desktop battleground started to fade away.

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To give a history, Yahoo commenced in 1994 under the name Jerry’s Guide to the World Wide Web, which was essentially a compilation of websites curated by two students of Stanford University, Jerry Yang and David Filo.

This list grew at a fast pace due to the millions of Americans that began to turn on dial-up Internet connections.

When people set up these internet connections, they desired a homepage that could direct them to all of the destinations that they deemed essential and visited frequently.

The website went public in 1996 and gained popularity until it rose to astounding heights, eventually reaching their peak of $500 per share in January of 2000.

A share during today’s post-split calculations would equal around $125.

This is major because internet usage shot up during the following years, as shown in the graph below.

However, Yahoo missed a crucial opportunity by not choosing to convert the website into something greater than just a portal.

With their early lead and millions of users, it could have been something huge.

At the peak of the bubble, Yahoo spent $5.7 billion on buying Broadcast.com, as well as $4.5 billion to buy Geocities.

It was reported that they later destroyed their chance to buy early versions of Facebook and Google, websites that are now thriving in the technological world.

Yahoo’s particular search offering holds a mere fraction of the market currently, though they tried to make up for missing out on buying Facebook by purchasing another social network, Tumblr.

This eventual purchase did not help them.

You can see Tumblr valued by Yahoo here.

During the last four years, Mayer, who is a former executive for Google, attempted to take control of Yahoo and put them back on the playing field.

Sadly, her tenure was unsuccessful due to confused strategy and unfortunate mismanagement.

When the iPhone came out, revenue peaked the year after in 2008, but traffic has maintained a steady decline as users continually find that their attention is drawn to newer and more relevant apps and websites.

When Jerry Yang made the risk of betting $1 billion on Alibaba in 2005, it managed to keep Yahoo afloat and successful enough to stay alive.

That move bought 40% in what would eventually turn into China’s e-commerce leader.

Over time, Yahoo made the decision to sell parts of the holding, but its current stakes remains at a worth of over $30 billion at prices today.

This investment ended up being so abundantly successful that it became worth much more than the flagging core business of Yahoo.

In 2015, management at Yahoo mapped out a tax-free spin-off for its stake in Alibaba, a plan that would unlock shareholder value.

However, they canceled the move at the last minute due to the IRS refusing to offer its blessing for the action.

Yahoo has since been evaluating other strategic means and alternatives with a long auction process lasting months that would benefit its core business.

This process has earned headlines, as well as constant speculation and questions.

The sale will not contain Yahoo Japan or the company’s stakes and holdings in Alibaba.

While many experts have been certain for a long time that Verizon in the frontrunner, others put in bids.

Dan Gilbert and Warren Buffett, both billionaires, pledged their support to one offer while the parent company of Yellow Pages, as well as a private equity firm called TPG followed suit.

In the final accounting, however, Verizon reigned victorious in snagging Yahoo’s technology and web properties for a relatively low price, 22 years following inception.

Some say that the end of Yahoo is an ironic one.

While the consumer web opened and allowed the portal to be a sort of online superpower, Yahoo is now destined to be consumed by a company that allows a higher number of users to access the Internet daily from anywhere in the world.

These figures are greater than the founders of Yahoo could have ever anticipated or dreamed about when the website first launched.

Conclusion

Yahoo started out as a simple web portal.

It has since become a great internet powerhouse used for searching, gaming, and weather and news updates.

Some say the fall of Yahoo is due to poor buying choices by the company, including passing up young versions of Facebook and Google.

Yahoo’s shares were plummeting since the beginning of 2015, as the graph below indicated.

However, these numbers were growing after there was speculation that Verizon would purchase Yahoo to combine with AOL, a fact that was announced in the last week.