July 26, 2016 — After learning of Verizon’s purchase of Yahoo, Analysts praised the carrier’s strategy but questioned whether it can be executed successfully.
“Forward wind the clock, and imagine 5G providing superfast internet speeds, and demand from users for more and more video – high quality video, maybe even combined with virtual reality. Then combine this with Yahoo content, Yahoo’s one billion users, and the AOL advertising tools. That is what Verizon is up to; other telecom companies need to come up with a response.”
“From the VZ perspective, we believe that this deal makes a lot of sense. While there are many long-term challenges, the near-term synergies will be significant. YHOO and AOL overlap in many, many areas and we expect the combination to drive greater scale with significant cost-savings. Both companies have content, search, video, ad-tech, corporate infrastructure, and among others.”
“The telecom sector is in the midst of not just one, but indeed several, important transitions. The smart phone cycle is ending; the subsidy model is dying; wireline and wireless networks are converging; cable is coming (to wireless); and most of all revenue growth is stagnating. As each company responds to its own unique set of challenges, strategies are diverging. Verizon’s strategy is to buy content.
“Finding synergies in the combination of Yahoo, Verizon and AOL is easy. Finding synergies in the numbers will be a little harder. Don’t get us wrong; we think the strategy has merit. But investors should be sober about how difficult it will be to execute.”