Group 4

Members:
Arellano, Alecssi

Clemente, Steven

Bautista, Mary Rose

Lagmay, Carol

Carzon, Monique Angelica

Osuyos, Ed Darwin

Co, Ivy Pracylynn

Torrechiva, Debbie Jamila

CASE # 3 : YAHOO PURCHASED BY VERIZON

1. What is the background?
After a months-long bidding process and many layoffs, Yahoo has finally found a
buyer. Verizon (which owns AOL, which owns TechCrunch) is officially acquiring Yahoos
core business for $4.83 billion in cash, which includes Yahoos advertising, content, search
and mobile activities.
Just over a year ago we acquired AOL to enhance our strategy of providing a cross-screen
connection for consumers, creators and advertisers, Verizon Chairman and CEO Lowell
McAdam said in the release. The acquisition of Yahoo will put Verizon in a highly
competitive position as a top global mobile media company, and help accelerate our revenue
stream in digital advertising.
Yahoos stakes in Alibaba and Yahoo Japan arent part of the acquisition. These stakes are
worth tens of billions of dollars alone. As of Friday July 22nd, Yahoos 15 percent stake of
Alibaba represented $31.2 billion, and its 34 percent of Yahoo Japan was worth $8.3 billion.
Yahoos patent portfolio, which is worth around $1 billion, isnt part of the sale either.
Yahoos Sunnyvale headquarters are part of the acquisition, a source told TechCrunch.
Yahoo will be integrated with AOL, and Verizon EVP and President of the Product
Innovation and New Businesses organization Marni Walden is going to lead the process. AOL
CEO Tim Armstrong also mentions Marissa Mayer in his memo though. For me personally,
Im planning to stay. I love Yahoo, and I believe in all of you. Its important to me to see
Yahoo into its next chapter, Mayer wrote in an internal Yahoo memo. The transaction is
expected to close in Q1 2017.

Yahoo is a company that has changed the world, and will continue to do so through this
combination with Verizon and AOL. The sale of our operating business, which effectively
separates our Asian asset equity stakes, is an important step in our plan to unlock shareholder
value for Yahoo, Marissa Mayer said in the release. This transaction also sets up a great
opportunity for Yahoo to build further distribution and accelerate our work in mobile, video,
native advertising and social. Yahoo and AOL popularized the Internet, email, search and
real-time media. Its poetic to be joining forces with AOL and Verizon as we enter our next
chapter focused on achieving scale on mobile. We have a terrific, loyal, experienced and
quality team, and I couldnt be prouder of our achievements to date, including building our
new lines of business to $1.6 billion in GAAP revenue in 2015. Im excited to extend our
momentum through this transaction.
Last year, Verizon acquired AOL for $4.4 billion to boost its media and advertising
businesses. Verizon remains a giant telecom company, but the acquisitions of AOL and now
Yahoo show that the company wants to diversify its revenue and operations.
Once the deal closes, Verizon wants to merge Yahoo and AOL to form a bigger advertising
and media subsidiary. This way, AOL gets more scale and reaches enough internet and mobile
users to become an advertising giant reaching hundreds of millions or even billions of people.
As we noted last week when reports emerged that a deal was imminent, AOL has been
preparing for this integration process for months already. It will be a sizeable integration
process, and the company seems to want to hit the ground running when it comes to
combining the two teams.
Eventually, Verizon wants to compete with Google and Facebook when it comes to
advertising. Online advertising is currently dominated by the two Silicon Valley-based
companies. Verizon wants to become the third way.
This isnt the first time a telecom company has been looking at ways to provide and operate
more than dumb pipes for computers and phones Verizon now wants to control whats
going through these pipes. And the company is investing a lot of money in this venture.

Our mission at AOL is to build brands people love, and we will continue to invest in and
grow them. Yahoo has been a long-time investor in premium content and created some of the
most beloved consumer brands in key categories like sports, news and finance, AOL CEO
Tim Armstrong said in the release. We have enormous respect for what Yahoo has
accomplished: this transaction is about unleashing Yahoos full potential, building upon our
collective synergies, and strengthening and accelerating that growth. Combining Verizon,
AOL and Yahoo will create a new powerful competitive rival in mobile media, and an open,
scaled alternative offering for advertisers and publishers.
Verizon now faces two challenges if the acquisition is approved by the regulator. First,
the integration process will be tough. In its most recent earnings call, Yahoo said that its
headcount stands at 8,800 employees and 700 contractors by comparison, AOL has 6,800
employees. So merging two big teams with thousands of employees will be no small feat for
everyone involved. Second, Yahoo has been losing quite a bit of money. Verizon will need to
turn Yahoo into a money-making, profitable company otherwise its going to hurt AOLs
bottom line.
In the official announcement, Verizon named a few reasons that justified an acquisition.
Yahoo has a global audience of more than 1 billion users, including 600 million on mobile.
The company also owns premium brands in finance, news and sports. Yahoo Mail has 225
million monthly active users. And when it comes to advertising technology and analytics,
Verizon named Brightroll, Flurry and Gemini. Interestingly, Verizon didnt mention Tumblr.
CrunchBase
In February and after years of turmoil, Yahoo officially announced that it was
exploring acquisition offers. A month later, activist investor Starboard wrote a controversial
letter saying that the entire board should be replaced and both the board and the management
team were dragging their feet on the acquisition process.
Between the lines, you could see that Starboard wanted to sell Yahoo as quickly as possible
and maximize the acquisition price. But Yahoo CEO Marissa Mayer kept giving interviews
and saying that she could turn the company around in five to seven years.

When Marissa Mayer joined Yahoo in July 2012, she had big plans to make Yahoo relevant
again. She doubled down on mobile, made dozens of acqui-hires, acquired Tumblr for $1.1
billion, acquired Brightroll for $640 million and revamped key products, such as Yahoo Mail,
Flickr, Yahoo Weather and Yahoo Messenger.
But all of these changes didnt really boost the companys bottom line, leading to
todays acquisition.While Verizon has been the most likely buyer from day one, other
potential buyers included AT&T, a private equity group led by TPG, and an investor group
led by Dan Gilbert of Quicken Loans. Verizon will hold a call in a little bit more than an hour
with more details about the transaction. Verizons stock is flat (+0.21 percent) in pre-market
trading following the news. The deal started leaking on Friday and shareholders anticipated
todays announcement.

2. Is it a Corporate Governance related problem? Why? Why not?

Yes, there is corporate governance problem. When Yahoo launched in 1994, it was
patronized by people in the Internet. But over the years, Yahoo became complacent. Through
two decades in industry, they failed to decide if it was a media company or technology
company. The past CEOs of Yahoo failed to position their company to the market. Marrisa
Meyer became the CEO of Yahoo in 2012. Yahoos troubles began when she take over the
CEO of the company. Her strategies being the CEO havent improved the companys
revenue. And her big spending on media personalities by promoting Yahoo in the market
doesnt work. Yahoo has been sliding over the years. They tried to go with like Google and
Facebooks technology but they failed again. In 2008, Microsoft 45 billion dollars to Yahoo
but Yahoo rejected the offer and now its only for 4.8 billion dollars.
If Verizon sells the property, Ritchie the president of Ritchie Commercial, said it would find
plenty of willing buyers. Most of the slowdown, he said, has been in the smaller office spaces
sought by start-ups, which are struggling to secure financing after years of easy
money. Venture funding in the U.S. was down nearly 18% in the first half the year compared
with last year, according to KPMG. Potential buyers for Yahoos Sunnyvale campus could
include tech giants like Google or foreign investors that have sought secure returns in Silicon
Valley real estate amid uncertainty in global economies. It would be a rush among
institutional investors and technology owner users," Ritchie said. If Verizon does decide to

cash out, any sale could be a ways off. Bank of America, for example, acquired vast amounts
of Southern California office space in 2008 when it purchased Countrywide Financial.

3. Identify the problem

The Revenues of Yahoo! Has been sliding since 2010, each year the share price has
been falling. During the early years of Yahoo! It has an huge early success in the internet
business. Once the King of Internet Yahoo! Is worth $125B but Verizon bought it for only
$4.83B this past July. In 1998 Yahoo! Turned down Googles offer of $40B and in year 2000
it has even reached the value of $125B. It tried to buy Facebook to Mark Zuckerberg for $1B
but he turned it down. The main problem faced by the company is technology, technology
changes fast and other companies like Google put on smart acquisitions, like buying Youtube,
Instagram , Waze and Android. When the rise of Smartphone began the use of desktop and
laptops began to fade. Over the last four years, Mayer, a former Google executive, tried to
right Yahoos ship. But her tenure was marred by confused strategy and mismanagement.
Revenue peaked in 2008, the year after the iPhone came out, and traffic has continued to fall
as users find their attention drawn to younger, more relevant websites and apps. The company
was beaten by its competitors because of lack of promotions. Unlike Google who has its own
operating system Yahoo didnt make a move to acquire such in order for it to be relevant. The
company doesnt have accurate plan in budgeting and they invested more on unnecessary
expenses total of $450 million over four years. These investments includes tumblr, linkedin,
alibaba, flickr etc which is not that active over the years.

4. Present possible solutions. What different approach can you think of? Be specific
It is the end of Yahoo. The company that was once among the most valuable internet
properties. We can see that Yahoo did not see that this will happen. Thats why they rejected
many offers from different huge companies before to buy Yahoo. It is best if Yahoo did its
best to find the best financing assistant so that bankruptcy didnt occur. It is a good decision
that its not yet the best. It is best if Yahoo were able to cope up with how fast technology and
media is changing. Its an ironic end. While the opening of the consumer web made the
portal an early online superpower, now Yahoo will be eaten by a company that enables more

users to access the Internet every day, from anywhere, than Yahoos founders ever could have
dreamed when they first launched.
What Yahoo! really needs is a razor-sharp focus on very highpotential areas that can generate $10 billion+ in revenue within a fiveyear horizon. Thats the sure-fire way to get the stock price back up. And
that focus should be directed only from the very top. Yahoo could've made
a comeback if Mayer focused on one or two communication tools, say
email or a messaging app like WhatsApp. Micromanagers make poor
CEOs. Yahoo needed an innovator. They needed one with a plan beyond
asking to read everyone elses ideas.
The first marketing area that needs work is branding. Yahoo has high name
recognition and roughly 700 million unique monthly visitors. The brand should give visitors
good reasons to visit Yahoo and buy. It should also provide some uniqueness so other brands
cannot use the same messaging. With Its You, any brand could say that, and it does not
give users clear reasons to go to Yahoo. Yahoo needs to identify its strengths, or competitive
advantages, and match those up with sizeable market opportunities. Then it should formulate
a brand image that will plant its competitive advantage in the minds of the target audience.
The Its You campaign did not identify any specific audience, and did not create any image
than embodied Yahoos unique capabilities or advantages. Yahoo ads should focus on the
benefits it provides. How should it determine these benefits? Listen to customers and the
marketplace. Once it has created a strong brand image and effective ads, Mr. Thompson
should insure that Yahoo has a highly skilled, well-trained sales force that has the killer
instinct to sell Yahoos online display advertising to agencies, companies, and just about
anybody that can either buy advertising or refer others that will. Even if they are not potential
customers, everyone is a potential referral source, and Yahoo could use all of the customers,
prospects, and referrers it can muster.

Sources:
https://techcrunch.com/2016/07/25/verizon-buys-yahoo-for-4-83-billion/
http://www.forbes.com/sites/briansolomon/2016/07/25/yahoo-sells-to-verizon-for-5-billion-marissamayer/#1b42f02371b4

http://www.fastcodesign.com/1670416/why-open-innovation-could-be-marissa-mayers-downfall-at-yahoo