Verizon nears deal to acquire Yahoo
bloomberg.com
bloomberg.com
Verizon is really doing a big transition with this acquisition and their AOL acquisition. They've acquired alot of valuable web space to put adds on/monetize. This is a probably good news for Yahoo employee's as Verizon then has a vested interest in keeping the company running and not splitting it up into pieces like a PE firm may be more inclined to do.
The one interesting thing I've heard is that Verizon isn't interested in Yahoo's patent portfolio, which means it could still be up for grabs.
Hopefully its bought by a Microsoft/Google consortium and very liberally cross licensed rather than a private equity firm who will look to more aggressively monetize it.
I also heard that Tim Armstrong, formerly of Google with Mayer will lead the combined AOL/Yahoo company, which means that Mayer probably isn't coming along as part of this deal. I think most people expected this.
If this ends up going through for the reported 3.5 billion, then Verizon has bought a significant portion of traffic on the web for roughly 8 billion (AOL was acquired for 4.4 Billion).
This could end up looking like a very good acquisition in a few years!
It makes sense. The best buyer had to be someone that isn't Google or Facebook but is significantly invested in online advertising.
I don't think such a consortium exists, Microsoft and Google are usually on opposite sides. Microsoft (along with Apple/RIM/others) bought the Nortel patents in 2011 and sued Google, Samsung, Huawei, and others. Google bought Motorola and its patents the same year and sued Microsoft. Patents are weaponized as soon as these companies acquire them.
Not great for the ten-year plan, but those are a luxury of companies with lots of products selling today.
Google bought Motorola and continued the lawsuits already started by them
A cursory look offers a bunch of patents related to searching, messaging, databases, information storage/retrieval, etc.
[0] https://patents.google.com/patent/US7325204B2/en?assignee=Ya...
Verizon Customer Proprietary Network Information Policy: https://www.verizon.com/about/privacy/customer-proprietary-n...
With wireless, all of the carriers transparently proxy most traffic and can do a variety of things with it.
I remember reading a scathing in-depth piece on him some time ago. Fired a guy in the middle of a meeting, shamed some employees that had delivery complications with their children. I was surprised he's still around.
I suppose the new CEO will be as criticized and unloved as the old one.
That's why I'm always a little skeptical about hiring leaders from one-trick pony companies. Many come to mind. Intel (x86), VMWare (vSphere), Google (ad words) and the list goes on.
It's likely you could be a very incompetent leader at these companies and still show results because the product sells itself &/or has a virtual monopoly for a number of years.
I have seen very, very few Intel execs leave and be successful outside of Intel. In fact, I can't think of any. Are we now seeing the same from Google?
John Doerr was also a sales executive at Intel in the late 70s.
Also, most executives don't become famous. There are dozens of ex-Google and ex-Intel executives you've never heard of chugging away as executives at other companies, presumably succeeding (because they haven't been fired or demoted). But you've never heard of them because they aren't wildly or prominently successful.
I would also consider Doerr as starting his career at Intel (back when it didn't have a virtual monopoly) rather than being a senior leader.
I think these one-trick ponies are good places to start careers, I just think the market should be more wary when hiring exec leadership (VP to c-level) from them.
It's also incredibly rare for executives to leave these companies in the first place. They are compensated wildly; if they leave, it's usually to retire.
Marissa and Armstrong were big names coming out of Google that many would argue flamed out. The fact that Sheryl Sandberg makes what I would consider is a lateral move to another successful company doesn't really come into play.
I'd rather hire the leader from a company with a diverse set of products that was directly accountable for an independent P&L. You don't really get that at Intel as everything is a derivative of x86 and I don't think you get that very much at Google (where the real P&L that matters is still search advertising.)
I can speak specifically to Intel, that execs increasingly don't leave because they lack the necessary experience to go run an independent business. Sometimes they manage to get hired elsewhere and, in most cases, they flame out and either retire or return.
High-flying companies in SV have become another form of cover-your-ass pedigree that allows the entire management chain to pass the buck on hiring decisions. I see this at the lowest level from IC engineering hires up to the CEO. Hiring someone/investing in their company/putting them in any position of trust, after they've been "minted" at the successful big company is "safe"; it hardly matters what the person did, or what results they achieved, just that it's "on their resume". Whereas hiring someone from a scrappy startup that worked their ass off and executed but wasn't in a position to influence strategy will be branded a "loser" and in a much worse position to get hired vs. the safe bigco candidate.
This is really a big problem/opportunity, and it's all down to our inability to measure/attribute individual performance in a team setting. But it does make you wonder, from a career-planning perspective, should I optimize for "name" or actual learning? Should we all follow Sandberg's advice and just "Get on a rocket ship" and "let our careers take care of themselves" even if the company is already on a breakout trajectory before we got there? As someone who's spent a lot of time optimizing for actual learning, I'm starting to think it's the losing strategy, but then, all my friends work for big companies like Apple / facebook / google, so maybe their influence is just rubbing off on me.
Certainly it's easier to look at education, corporate brand as signaling than to really dive into someone's skills and capacity to be successful.
I wonder whether truly great companies are different. I think that, just like really great investors (Fred Wilson and Michael Seibel, to name two) have said, "just tell me what you're doing in simple language", implicitly saying "I trust my own judgment" (vs. some elaborate dance of social networking/signaling), I suspect hiring at really top-tier companies doesn't turn as much on pedigree as on some measurable element of skill, or actual work performance.
In any case, the people I admire most in this world are the contrarians who have the conviction to act on their beliefs, like the Big Short guys, or Billy Beane from the A's -- but that kind of thinking isn't career-friendly, AT ALL.
I also think Nassim Taleb has the right idea that "skin in the game is a moral imperative". In all cases where people pass the buck, the problem is that their interests (e.g. their own careers) are insufficiently aligned with those of their principals (the firms' investors). You want to really see what works, look at the guys who are playing with their own money (e.g. hedge funds, proprietary traders, closely-held companies), not the pundits on CNN.
Even more insidious because it actually works. The "average" Stanford CS major coming out of Google is very good. Your false-positive rate (they're actually not that great) is pretty low. However, your false-negative rate (if you didn't go to Stanford or work at Google, you're crap) is insanely high.
But if Google is hiring for more than that - say, for what the employee will come up with on their own in their 20% time - then the false negatives could be extremely expensive to Google.
This hiring process, together with internal structure, is exactly why companies eventually stagnate. They hire for compliance and create an environment that values the same. There may be smart people in the organization, but great ideas are not compliant because they require change. This is why consultants and outside agencies are needed to come up with ideas - ideas are not welcome in many environments.
When the money becomes harder to scratch out it'll be better to be able to do.
I like this quote by John Boyd, who wrote the book on aerial combat.
“Tiger, one day you will come to a fork in the road,” he said. “And you’re going to have to make a decision about which direction you want to go.” He raised his hand and pointed.
“If you go that way you can be somebody. You will have to make compromises and you will have to turn your back on your friends. But you will be a member of the club and you will get promoted and you will get good assignments.”
Then Boyd raised his other hand and pointed another direction. “Or you can go that way and you can do something – something for your country and for your Air Force and for yourself. If you decide you want to do something, you may not get promoted and you may not get the good assignments and you certainly will not be a favorite of your superiors. But you won’t have to compromise yourself. You will be true to your friends and to yourself. And your work might make a difference.”
He paused and stared into the officer’s eyes and heart. “To be somebody or to do something. In life there is often a roll call. That’s when you will have to make a decision. To be or to do. Which way will you go?"
From where I'm sitting, I see zero inflation, a federal reserve that's happy to keep buying assets to stimulate growth, a sluggish economic recovery that's led to 1-2% growth in the US, meanwhile 50% growth in aggregate household nominal wealth since 2010 (that's from the fed's survey of consumer finances) so everyone with home equity and stocks feels rich, and bigger-than-ever VC fundraising from LPs.
I'm gonna get back to work now, but, as much as I'd like this phase of ZIRP-driven asset price inflation and general ethos of cheap money/greed to end, I just really don't see it, at least not in the next 10 years. Please, tell me I'm wrong, I want to be, I just don't see it.
Eventually we'll have real growth (and likely a lot of inflation with it), but what happens between now and then, how long it takes, how bad it gets, is TBD.
All in my humble opinion.
When you're young - first couple years out of college, or even while you're in college - it's time to optimize for learning. Maybe that means working at a startup, maybe that means founding one, maybe it just means going to a highly-regarded research university and working on some projects with the professor. If you didn't get into a highly-regarded university, it means picking a topic of interest and studying intently about it on your own.
Eventually at some point, you should get pedigree on your resume. A good university would do this, but so would working at a well-regarded blue chip or fast-grower. And most of them are more than willing to hire out of startups, if you have an interesting project that makes you stand out from the crowd.
Stay at the company as long as it remains interesting, where you're learning new things and developing new skills. Leave when it gets boring. Hopefully you've built up a nice nest egg in the process - big companies pay their high performers very well.
Repeat as necessary.
If my experience being part of the Amazon Echo team has taught me anything, it's that the most simple looking things (like Search, or Voice UI) require the most complex skill set.
Even if Google got just one thing right in your eyes (aka Search/AdWords), rest assured, underneath they employed a considerable number of disparate 'tricks' to get that right-- you just chose to umbrella dismiss those many tricks as 'One Trick' (TM).
In July 2005, Google acquired Android Inc. for at least $50 million, whose key employees, including Rubin, Miner and White, stayed at the company after the acquisition.
In particular, Google basically acquired some people. Anyone who thinks they had a real OS at that point, and anything that approached even the first version of android, is smoking something.
Source: I did diligence on the acquisition, and I watched them develop android at Google.
I'm sure Echo is very complex, but it's usually not the complexity of the problem that is important from a business standpoint, but choosing which problem to solve.
I think Amazon could take over the phone market. Just make a phone that is an "Amazon remote control" with shopping, music, and video streaming built in, combined with Alexa that "just works". (Or a color e-ink phone with no video support, but a long battery life.)
Where does Amazon succeed here where Facebook failed (and Amazon currently fails)?
No way.
>ust make a phone that is an "Amazon remote control" with shopping, music, and video streaming built in
The problem is the world is much bigger than Amazon. I buy from Amazon often, but I don't want it to be at the center of everything I do. I think most people would agree. That's why all their phones failed, and why the facebook phone failed too.
I'd put it this way: hyper-growth makes everyone look great, but hyper-growth is often a one-off event whose causes are obscure.
When someone gallops into town riding a white exponential, ask whether that person had any direct causal influence over the genesis of that exponential. If the answer is no, evaluate them as if they held the same position in an average firm.
Unless you designed Google's original search or AdWords, "worked at Google" =~ "worked at IBM."
I'm not sure I agree. Think about all the infrastructure required to run those services; low-latency transactional databases, data centers, network engineering (peering, load balancing), etc., etc. Those are all enormous achievements that are rarely duplicated at other companies.
When you "ping google.com" and nothing comes back, do you assume that google.com is down, or that your Internet connection is down? What about "ping ibm.com"? :)
(P.S., ibm.com appears to block pings. Or it's down right now!)
For business leadership roles though, you often see people trying to coast on successes that they had little role in creating.
To be fair though, there are great leaders at all kinds of companies. And the success, money, and potential impact one can have at companies like Intel and Google attracts a lot of talented people. I think it's just a matter of not automatically assuming people are great just because of what's on their resume.
Google (er, Alphabet) has a lot of employees, and maybe not every single one is the best in their field (they hired me), but overall I think that a Google tenure on your resume can be a meaningful positive signal for future employees.
At the very least, maybe they'll steal some of the really good ideas around here, like an internal social network. (Available for anyone using Google Apps, not just us ;)
I love that. I'm stealing it! :-)
Your overall observation is spot on too.
I know a few people at Yahoo, and the good employees (i.e. the ones who didn't just do 15 minutes of work a day while "telecommuting") tended to speak highly of her too.
I think what you're really seeing is Warren Buffett's aphorism, "When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact." People tend to overestimate the effect of a CEO on the business's returns. Usually the prime drivers of a business's success are external to the business itself (eg. customer preferences, technological shifts, competitive landscape).
You can draw your own conclusions about what that should mean about CEO pay, but unfortunately human beings are hard-wired with a cognitive bias to ascribe effects to people, rather than to systemic factors.
(As a side note: I wonder if this is what'll happen to Musk regarding Tesla. As amazingly innovative as Tesla has been, the auto industry has a reputation for terrible economics.)
I was a part of a startup (interClick) that got acquired before MM became CEO and our experience of the rest of the org was pockets of smart dedication drowning in a mass of serfs passively resisting the will of the fiefdoms to which they belonged.
It seemed to us that what MM should have done is broken up the fiefdoms and dismiss the feudal lords that reigned before revitalizing the suite of properties and expanding mobile/video.
If I'm a hard worker, and I see people doing nothing all day, nothing would motivate me like firing them.
eg look at people working remotely, check vpn logins, and if they weren't logged in while working remotely, ask them for a reasonable explanation (maybe they were working entirely locally, but probably not), then terminate.
Edit based on your edit: Probably not quite as abruptly as you suggest - usually you need a pattern of underperformance to fire without risking a lawsuit. But Yahoo underwent several rounds of performance-based lawsuits. I think her big mistake there was not cutting once and cutting deep - multiple rounds of layoffs are much more demoralizing than getting rid of all the underperformers at once - but hey, Monday-morning quarterbacking. We aren't the ones at the top making the call.
Or maybe I missed the firings...
(Fine-grained) surveillance breeds distrust. The moment I hear that a company I work for is aggressively using surveillance-ware to evaluate employee performance is the moment I start looking for another job.
I don't know a single person at Yahoo and I don't work there but I remember reading articles when MM implemented the new rules for telecommuting and if I remember correctly most painted the policy negatively. I'm glad to read another perspective on the topic even if it is coming from someone with only second hand knowledge.
It's obviously good to be skeptical of second hand experiences but I'm not sure they should be dismissed wholesale. I imagine part of the point of HN is to share our personal experiences. I've never worked at Boeing or Northrup but I have enough friends/colleagues who have or currently do that I can form some informed opinions on what it's like working there.
I experienced Marissa's ire firsthand too. But despite that, I give her high marks for trying. Yahoo had been ossified long before she got there; read PG's essay on Yahoo's culture. Blaming her for Yahoo's troubles is like blaming Dönitz for Germany's loss in WW2.[1]
On the other hand, I tried to short Tesla recently and couldn't get any shares.
The article states that "Verizon is discussing a price close to $5 billion for Yahoo’s core internet business..."
The first version of the article that appeared on the terminal cited 3.5 Billion. Infact the entire article has significantly changed since it was first published:)
Isn't AOL's traffic a small fraction of Yahoo's?
If that number is right and it happens, it will be less than a tenth of what MS offered for Yahoo earlier - IIRC it was ~44B.
Good news for Yahoo shareholders. I have no faith that Verizon will turn Yahoo around. I'm not sure it's good news for employees. You're bringing in Verizon corporate culture into a Silicon Valley company - have fun.
People don't see growth in Yahoo. They were on top before Google (I remember Yahoo was _my_ choice for a long time) and it seems they've just been existing, coasting on brand recognition but not accomplishing much. It's easy to see a future where Yahoo only goes slowly downward.
[1] While costing about $4 billion a year to run, versus $35 billion a year for Verizon's wireline division.
http://i.imgur.com/PjdPzcs.png
As a Mozilla intern I've always thought that was funny.
[1] http://www.zdnet.com/article/mozilla-strikes-firefox-search-... [2] https://en.wikipedia.org/wiki/Netscape
Whatever she did failed to turn the company around but that alone doesn't make her a terrible CEO.
No one, no one could have saved it and made it relevant. I think she did a pretty commendable job trying.
Agreed. I simply can't understand why we keep flogging this dead horse, Mayer or Verizon, none of it makes any sense. Am I missing something regarding the true value of Yahoo!?
Yahoo never had a chance.
As a stand alone entity, Yahoo simply had no real chance. Their only path to relevance was a complete remodel of their priorities ~10 years ago.
Verizon, honestly, doesn't make alot of sense but my guess is they think they can integrate it into their operations to make money. Idk how they would.
A 10-year old who knows how to play Monopoly could come up with it.
For much less money.
If you sell yourself as a savior at > $50M/year compensation, it is not unreasonable to demand close-to-miraculous results, not "trying".
Yahoo is apparently still worth ~$4 billion. For quite a while there, its nominal stock value was negative after dispatching Ali Baba, despite cash-on-hand in excess of zero.
I'm not a fan of Meyer's, but she managed to keep the beast alive, where her predecessors were killing it swiftly.
One of the previous CEOs was the founder Jerry Yang. He made one of the most epic corporate investments when he fought for Yahoo to invest in Alibaba.
No one, no one could have saved it and made it relevant.
If we are going to set the bar so low, I can think of a lot of qualified people in the Valley that could have done as good or better job than Marissa. She made a whole bunch of bets and basically none of them panned out. Her top skillset was supposed to be Product Management and the best that has yielded are one-time decent Yahoo products becoming shittier.
This fallacy needs to die. You cannot just subtract the value of Alibaba and declare the company "less than worthless". Company valuations don't work that way
Yahoo has significant debt. If Yahoo were willing and able to liquidate Alibaba or Yahoo Japan the proceeds would be used, at least partially, to pay off that debt. You cannot stick all of the company's debt on a select portion of the business and declare it worthless based on that.
I can and do.
> Company valuations don't work that way
I disagree, except if you care to shell out <10 million and say "see it's worth something!" which is disingenuous. The amount to maintain the remnants will dwarf the cost of acquisition, making it a net loss.
Then you're wrong. That isn't how company book value works. A company's book value is the total of its assets minus the total of its liabilities. Removing an asset from the calculation without adjusting the liabilities is just wrong. It isn't proper accounting.
> I disagree, except if you care to shell out <10 million and say "see it's worth something!" which is disingenuous. The amount to maintain the remnants will dwarf the cost of acquisition, making it a net loss.
What numbers do you have to support this? What portion of Yahoo's liabilities are coming along with the assets Verizon wants to buy?
> Yahoo’s total market cap is less than the $40.5 billion, and after accounting for the cash on the company’s balance sheet, this means Yahoo’s core business is valued at less than $0. Now, this isn’t a new development that will disappear with some quick arbitrage. In fact, the value of Yahoo’s core business has been negatively valued for more than a year, so investors are seeing the value discrepancy measured by traditional means but just don’t believe in the company’s trajectory.
Edit (the numbers):
Long-term investments: 31DEC13: $5B -> 31DEC14: $44.6B
Deferred Long Term Liability Charges: 31DEC13: $1.1B -> 31DEC14: $17.1B
1. Reduce flex time or work from home: The logic on doing this was questioned at the time, but working with your colleagues in a confined space has proven to be beneficial (Pixar, Yahoo, almost any start up)
2. Developing child care policies that included having the kid be close to her (or this could be Marissa Mayer).
However, she allowed herself to become a larger than Yahoo personality. How many articles were about her describing her life, things she did, she was promoting her brand, not that of Yahoo. She then fell into the acquisition trap of getting Tumblr.
Pixar and startups work well not because they are in a confined space but because they have a good company culture that allows people to do their job. Things like reducing flex time and remote are just surface changes that avoid addressing the deeper issues. My company does the same: At every step people are discouraged from making changes. Management complains about lack of innovation so they do "innovation days" and put up innovation posters. But they still squash any good ideas people have because the next deadline is always two weeks away so there never is time to think about things.
But then I think any strategy that started with "This is how we're going to save Yahoo" was doomed to fail. The brand is synonymous with Web 1.0 and was tarnishing their acquisitions.
A strategy of "This is how we're going to leverage Yahoo's assets" would have been a better starting point. Yahoo should have become a parent company, like Alphabet, that stays silent and out of the way. Then run down the Yahoo brand while building the acquired brands and re-branding the successful parts of Yahoo as something else.
The stock market mis-prices things all of the time.
On Mayer, well eh she put her hand up and suffered. but then Yahoo was pretty much past saving. Hopefully, she's learned from her mistakes and moves to something more productive.
Given that this is pretty much all that is left of Opera after the Chinese buyout [1] it may well be a chance for Yahoo to get back in the SoC game.
Fifteen years or so from now, some company will likely be picking up Facebook on the cheap. By that time, Twitter will probably be history.
Google?
The wheel of life...
Yahoo's current market cap is ~$37b
Yahoo has $6B in cash and short term investments, and $1.2B in debt.
Yahoo will spin it off tax free to shareholders.
Ask an accountant if you don't believe me.
1. don't touch yahoo finance
2. bring back pipes
https://cdn0.vox-cdn.com/thumbor/zL414AMfclnMcwL59xa3ZTXrcDw...
I would hope that a media company like Yahoo could have existed independently from a parent company.
As in, two different data tiers, they family of businesses and everything else.
If there were true net neutrality, the government would block this purchase.
Not sure how will the net neutrality be affected with this acquisition, but this is mostly done to build a huge media/entertainment(Yahoo! + AOL) business which will be complementary to Verizon's current offerings.
https://www.yahoo.com/tech/yahoo-reports-another-big-loss-21...
> Yahoo also reported Monday that it's writing down $482 million in charges related to the declining value of Tumblr, the social-blogging service that Yahoo acquired for $1.1 billion in 2013. Combined with an earlier write-down of $230 million, that indicates Tumblr's value has plunged by almost two-thirds.
Yahoo Fantasy Sports is very popular, considered by many to be the best online fantasy sports site.
Yahoo Finance is popular.
Yahoo Mail has a lot of people who would do anything to continue using it.
Digging around a bit, here's what they consider to be their "core services" that are getting their focus lately: Search, Mail, Tumblr, Sports, News, Flickr, Lifestyle and Finance. You can argue more about some of those than others.
- There will be a people drain from Yahoo. Anyone was is passionate about Yahoo will feel completely disenfranchised with being merged into a smaller competitor that is owned by a larger company. Some people will hold out for being made redundant in the hope of a good severance package, and some will simply stay regardless, but those who see what is happening will realise that Yahoo is over, and won't want to be a part of the frankenstein being assembled within Verizon.
- Yahoo's main properties (Homepage, Weather, Finance, Mail) will survive, Flickr/Tumblr I don't know. Tumblr itself has suffered from the difficulties of merging into Yahoo's culture and way of doing things. Flickr was resurrected in some ways, but struggles from the difficulties that other web 2.0 brands have - how to stay relevant and interesting to consumers today when the industry has changed so much since their creation.
- Mayer will go. She tried and she didn't succeed. She'll get a decent severance package, but Tim Armstrong will finally get what he's wanted for a long time. Whether he's able to successfully merge two large-sized businesses together I don't know, this is a different challenge compared to acquiring businesses like Goviral or Millenial Media, we're talking about a headcount of ~8000 employees, and there will be lots of duplicate roles. I don't expect the merger to go smoothly - I expect it to be a bit messy.
Either way, the goal of creating a relatively strong #3 to Google and Facebook seems at this point a lost cause - both Google and Facebook have market valuations that dwarf what AOL and Yahoo were worth at the time of their merger, and given a signal of what we might see in the next couple of years.
If they anticipate substantial antitrust scrutiny of the deal (and I would think Google buying Yahoo! would have to in ways many other suitors would not), it might not be worth the purchase price plus the cost associated with the scrutiny.
I still remember the "Go 3.0" marketing liner.
(Verizon is a much larger company, so if the Yahoo culture ended up dominating it would be an inversion)
This tells you everything you need to know, because AOL should have died years ago as well.