Verizon has finally admitted that its $9 billion deals to buy Internet search engine Yahoo and media company AOL did not work well.
Verizon Communications said on Tuesday it will take a $4.6 billion charge related to its Oath media assets – which includes digital media sites Yahoo and AOL – and a severance charge of up to $2.1 billion for voluntary buyouts in the fourth quarter, Reuters reported.
Verizon said it will be receiving fewer benefits than it expected from the combination of businesses that make up Oath. The largest U.S. wireless carrier by subscribers indicated that its main focus will not be on entertainment.
AT&T, the main rival of Verizon, is aiming to strengthen entertainment to reduce reliance on wireless ARPU.
Verizon, as part of its strategy to reduce reliance on wireless business, purchased Yahoo for $4.48 billion in 2017 and AOL for $4.4 billion in 2015. The aim of Verizon was to offer high quality content to its mobile data customers and improve ARPU.
Verizon said Oath’s revenue fell 7 percent to $1.8 billion in the third quarter of 2018. Verizon was aiming to generate $10 billion revenue from Oath by 2020. Verizon said it did not expect Oath to achieve its revenue goals.
Oath has struggled to improve its digital advertising business, competing with Facebook and Alphabet’s Google for ad dollars.
Verizon recently announced the resignation of Tim Armstrong, Oath chief executive and architect of the group, and the appointment of Guru Gowrappan.
The Wall Street Journal reported that people within Oath felt they did not have enough access to Verizon’s wireless subscriber data to improve Oath’s advertising. Verizon could be looking for alternative plans to revive Oath, analysts say.
Verizon earlier this week said that about 10,400 employees will leave the company by the middle of next year as part of its voluntary separation program. The employees will get a salary of up to 60 weeks, bonus and benefits, depending on their length of service.
The New York based-company said the severance charge was mainly due to the buyouts announced on Monday as well as other job reductions.
Verizon, which had 152,300 employees as of the quarter ended Sept. 30, aims to cut costs as it ramps up investment in its next-generation 5G network, which is expected to fuel its future growth.
Verizon appointed Ericsson veteran as its CEO to take a new look at its 5G related network investment and revenue generation.
It said severance charges in the fourth quarter would come to $1.3 billion to $1.6 billion after tax, with the Oath charge amounting to $4.5 billion after tax.
