Los Angeles Times
Posted with permission from Tribune Content Agency

SAN FRANCISCO — Yahoo Inc.'s days as a publicly traded company will soon be over, but under Verizon, its brand will get another chance.

The Sunnyvale, Calif., internet company, once a key guide to the World Wide Web, announced Monday that telecommunications giant Verizon Communications Inc. will buy its core assets for $4.83 billion and continue to operate them under the Yahoo name.

Shares of both companies slid Monday after the deal was announced. Yahoo stock was down 2.8 percent to $38.29 around midday. Verizon stock was down 0.8 percent to $55.67.

The sale comes after a five-month bidding process that saw interest from media groups such as the Daily Mail and IAC, internet companies such as Google and Microsoft, and private equity firms TPG and Bain Capital.

Verizon, the nation's largest wireless carrier, was the clear front-runner, having snapped up the remains of AOL last year for $4.4 billion to expand its digital portfolio.

The deal — under which Yahoo will part with its email service; its websites dedicated to news, finance and sports; advertising tools; real estate; and some patents — is expected to close in the first quarter of 2017. The company will continue to operate independently until then.

The sale does not include the company's cash, its shares in Alibaba Group, its shares in Yahoo Japan or its non-core patents (called the Excalibur portfolio). These assets are to remain with Yahoo, and the company will change its name and become a registered, publicly traded investment company once the deal is closed.

Yahoo's websites are to be integrated with AOL, but AOL spokeswoman Caroline Campbell confirmed that "Yahoo brands (such as Yahoo Finance and Yahoo Sports) will not go away." Instead, they will exist alongside AOL's standalone brands such as the Huffington Post, TechCrunch and Engadget.

The final sale is a far cry from the $45 billion Microsoft offered in 2008 — an offer Yahoo famously rebuked. But Yahoo's brand has taken a beating in recent years, with some analysts saying that the company should be happy to fetch anywhere near $5 billion.

Yahoo's former interim chief executive, Ross Levinsohn, was even less optimistic, telling CNBC last week that he expected the company to trade in the $3.5 billion to $4 billion range.

"The state (of Yahoo) is troubled, clearly," Levinsohn said. "We can look back over the past four years and say the strategy did not pay off."

The deal had been expected to end the four-year tenure of Yahoo Chief Executive Marissa Mayer, but she said early Monday that she expects to stay with the company.

"I love Yahoo, and I believe in all of you," Mayer said in a statement. "It's important to me to see Yahoo into its next chapter."

Yahoo's troubles began well before Mayer took the reins.

The company churned through five CEOs in six years, unable to decide if it was a media company or a technology company — indecision that resulted in it doing neither particularly well. It largely missed the mobile revolution, catching only the tail end once Mayer joined the firm.

Although Mayer helped create revenue for the company from its mobile products, her own leadership was marred with foibles. Her acquisitions — including the $1.1 billion paid for Tumblr — have been a bust. Her turnaround strategies (the company is on its second turnaround in four years) haven't improved the company's revenue decline. And her big spending on media personalities such as Katie Couric and David Pogue hasn't drawn the eyeballs of viewers as hoped.

This year, activist investor Starboard Value LP grew so impatient with Mayer that it wrote to shareholders, calling for an overhaul of the company's board of directors and pushing for a sale of the core business.

"We have been extremely disappointed with Yahoo's dismal financial performance, poor management execution, egregious compensation and hiring practices and general lack of accountability and oversight by the board," managing member Jeffrey Smith said.

The company's bottom line isn't the only thing that's taken a beating. Its image in Silicon Valley and among advertisers has also declined.

"The old-fashioned definition for a 'dying brand' was when a company went out of business," said Marlene Towns, a professor at Georgetown's McDonough School of Business. "The more recent definition is we stop talking about them. That is the first sign of imminent death in this connected age."

As "Google" became the default verb for search, Facebook laid claim to all things social and everyone else snapped up what was left of photo sharing, video streaming and instant messaging, Yahoo was noticeably left out of the conversation.

Brands don't die overnight, technology and branding experts said. But if they go long enough without a solid vision and groundbreaking innovation, they can quickly lose their place in the realm of relevance, first with their peers and then with the broader public.

Kraig Swenrud, chief marketing officer of Campaign Monitor, who has spent nearly 20 years doing marketing for high-tech companies, believes that Yahoo — founded in 1994 — became complacent and failed to do anything new.

"You either embrace the constant, never-ending change as a brand, or you perish," Swenrud said. "And that's what's happened to Yahoo."

The company was slow to follow trends too.

"Where's Yahoo with live video? Or Messenger as a service?" said Patrick Moorhead, president of Moor Insights and Strategy. "Yahoo isn't even participating in the two most recent trends, and the saddest part is Yahoo Messenger was one of the first messenger platforms on the planet."

Another problem the company has faced: Even as it tried to innovate in recent years under Mayer, its vision remained unclear — a holdover from the flip-flopping of former CEOs. Although the notion of "vision" might seem intangible marketing speak, branding experts such as Nicole Ferry, who is a partner and executive director of strategy at branding firm Sullivan, said having a vision and sticking with it is core to a company being able to evolve.

"If you look at a company like Facebook, their mission is to connect the world, so all its new products and acquisitions speak to that," said Ferry, who pointed to acquisitions such as Instagram and WhatsApp, which have all grown alongside Facebook and contribute to that company's ongoing dominance of the social category. "Or Google's mission to organize the world's information — many of its products and acquisitions serve that mission."

A mission like organizing information or connecting people doesn't necessarily get old, Ferry said. But standalone products do. As Yahoo has pingponged over the years from a Web portal to a media company to a mishmash of both, its acquisitions of products such as photo-sharing site Flickr and blogging platform Tumblr have done little to define what Yahoo is about.

"What are they trying to do?" Ferry said. "What is their reason for being?"

Which isn't to say the Yahoo brand is dead. Verizon did see fit to pay billions of dollars for it, after all.

Yahoo's online properties still attract about 1 billion users a month. Millions of users have clung to Yahoo Mail, and Yahoo Finance is a stalwart for financial news. These products alone aren't enough to return the brand to its 1990s glory, business analysts said, but in the right hands, people might care about Yahoo again.

"Look at Apple," said Towns, referring to the hardware company's reinvention under Steve Jobs.

"Or Microsoft," said Swenrud, pointing to the company's ongoing cloud-focused, machine-learning transformation under Chief Executive Satya Nadella.

"Or Hostess' Twinkies," said Towns. "They were going to go out of business, and news of that woke consumers up, and people started to remember the nostalgia of Twinkies, and the publicity helped them find a buyer and reinvent themselves."

In a world where a tube-like cake filled with cream can return to vogue, Verizon might be able to breathe new life into Yahoo.

Analysts have said Yahoo would complement Verizon as the mobile and broadband company continues to bolster its media efforts.

Yahoo properties such as Yahoo Finance and its online lifestyle magazines could be a valuable addition to the telecom company's portfolio, expanding its audience and reach and opening additional revenue opportunities as its pool of new potential mobile and broadband customers dwindles.

?By buying Yahoo, Verizon gets "high-quality web content" and the large advertising revenue stream that comes with it, said Laura Martin, internet analyst at Needham & Co.

The deal also boosts Verizon's already-sizable trove of user data. As a network provider, Verizon already knows how long users spend on certain apps and websites, as well as some of their personal information.

"They believe they can calibrate the overall data that Yahoo has ... in order to be able to go to ad buyers and say, 'Google knows a good bit about customers and can target ads. We know even more about customers and can use that to even better aim ads,'" said James Ratcliffe, a director in equity research at Buckingham Research Group.

"I think Verizon is, at the core, looking to move up the value chain beyond being a pure infrastructure provider and offering a wider range of services," he said.

Like AOL, Yahoo boasts a sizable and sophisticated digital advertising business, which could be ramped up now that the uncertainty surrounding the sale is over.

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(Los Angeles Times staff writer Samantha Masunaga contributed to this report.)