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February 9, 2016updated 04 Sep 2016 10:26pm

Verizon puts AOL CEO in charge of potential Yahoo buy

News: Talks to buy up assets from the troubled internet giant continue.

By Alexander Sword

Verizon is exploring a potential purchase of Yahoo assets with the CEO of now-subsidiary AOL, Tim Armstrong, taking a leading role.

There have been no formal talks and the US phone carrier has not hired bankers to conduct an offer, according to the report in Bloomberg.

Verizon has been mulling a purchase of parts of Yahoo since last year, and in December confirmed that it was interested in doing so.

The appointment of Armstrong to oversee the deal follows Verizon’s acquisition of AOL in May 2015 in a deal approximately worth $4.4 billion.

The acquisition was intended to support the company’s LTE wireless video, OTT strategy and IoT platforms. AOL’s assets included its subscription business, global content brands, original video content and programmatic advertising platforms.

For Verizon, the Yahoo acquisition would further expand its portfolio by adding new customers and popular platforms. The telco would be able to expand its go90 video streaming service and content offerings to compete with the internet giants of today such as Facebook and YouTube.

Yahoo has over 1 billion users on its email, finance, sports and video sites, while AOL has 2 million users.

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The AOL deal was driven largely by the aim to build a mobile-first platform, according to the press release describing the deal.

However, Yahoo’s performance in the mobile arena has not been particularly convincing.

In the first half of 2015, Yahoo took only 20 percent of its revenue from mobile, compared to 88 percent of Twitter’s and 74 percent of Facebook’s.

Between H1 2013 and H1 2015, Twitter saw its mobile revenue rise from $165 million to $744 million, while Facebook saw its rise from $1.024 billion to $5.287 billion. Yahoo’s rose from being not material to $485 million in the same period.

From Yahoo’s perspective, the deal will aim to appease shareholders as pressure increases over the flatlining performance of the company.

It is unclear exactly which assets would be sold. In December, Yahoo announced that it had abandoned plans to spin off its remaining stake in Alibaba in favour of potentially transferring its core internet business to a new company.

This mooted ‘reverse spin-off’ would see the company transferring all of Yahoo’s other assets, including its core internet business, into a newly formed, publicly traded company. The company suggested that the transaction could take a year or more to conclude.

Stocks in the new company would be distributed to Yahoo shareholders on a pro rata basis.

"A separation from our Alibaba stake, via the reverse spin, will provide more transparency into the value of Yahoo’s business," said Marissa Mayer, CEO of Yahoo, at the time.

In January, Yahoo unveiled plans to cut its workforce by 15 percent and close five foreign offices by the end of this year. It reported a $4.4 billion loss for the quarter ending 31 December 2015, compared to a net income of $166 million for the same period in 2014. Revenue increased slightly to $1.27 billion from $1.25 billion last year.

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