For whatever reasons are provided to justify such measures, it has become traditional for merger and acquisition moves to downsize the emerging or acquired firm. Verizon Communications Incorporated, email service giant – Yahoo’s probable new owner is by no means an exception to this unwritten rule.
With its US$4.48billion takeover deal set to be completed in a few weeks, Verizon Inc. disclosed its intention to lay-off at least 2000 employees at Yahoo as well as its AOL unit.
Currently, the biggest wireless operator in the United States of America, Verizon Communications Inc. had earlier in 2015 acquired AOL for US$4.4 billion as part of its strategic effort to make mobile video and advertising a major source of revenue for the company.
If the Yahoo deal is successful, it will together with AOL be known by a new brand name – Oath.
The rebranded wing at Verizon Inc. comprising of AOL as well as the email service and search engine - Yahoo is expected to be led by AOL’s Chief Executive Officer, Tim Armstrong.
However, many market analyst have argued about the viability of acquiring a company that was less than five years ago valued at about US$100 billion but whose owners are at the moment struggling to dispose it at even US$5billion.
To give more basis for such pessimistic view of the proposed acquisition of Yahoo, Verizon’s shares has plummeted by approximately 15% only in the first half of this year 2017 and a move to buy what many believe to be a failed enterprise has further divided shareholders at Verizon Inc.
In defense, the American wireless technology leader claims that although the search engine and email service company has been on the downside of market value over the last two years, it still boost of an over 200 million monthly visitors to its site (a figure that is obviously dwarfed by some other online giants like Facebook although some would say ‘but that’s not a mail service!’).
Its strategy to turn this ‘Dog’ as economist would call investment portfolio of this sort, involves combining Yahoo’s estimated over 200 million monthly visitors with AOL’s 150 million to offer targeted services for its advertising clients.
As the final process for the proposed acquisition unfolds, market observers around the globe are watching to see what magic Verizon Inc. would do with its new venture and the test of its claims to make it a profitable one, or face the devastating impact of failure on its entire business a reality to the world.