Verizon to Take $4.6B Writedown on Media Unit

After spending $8.9 billion to acquire Yahoo and AOL, the telecom giant is reducing the goodwill value of its media brands to only $200 million.
Matthew HellerDecember 11, 2018
Verizon to Take $4.6B Writedown on Media Unit

Verizon Communications is taking a big haircut on the value of its Oath media business, reflecting the disappointing performance of its AOL-Yahoo joint venture.

The telecom giant said Tuesday in a regulatory filing that it will take a $4.6 billion goodwill impairment charge on Oath in the fourth quarter. The division’s goodwill balance was about $4.8 billion, leaving it with a brand value of only $200 million after the writedown.

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As part of a major expansion into digital media, Verizon had acquired a number of legacy media brands in recent years to create Oath, including Yahoo for $4.5 billion in 2017 and AOL for $4.4 billion in 2015.

But according to the filing, a comprehensive five-year strategic planning review of Oath’s business prospects resulted in “unfavorable adjustments” in its financial projections.

Oath “has experienced increased competitive and market pressures throughout 2018 that have resulted in lower than expected revenues and earnings,” Verizon said. “These pressures are expected to continue and have resulted in a loss of market positioning to our competitors in the digital advertising business.”

The company added that Oath “has also achieved lower than expected benefits” from the integration of Yahoo and AOL.

As The Wrap reports, Verizon’s effort to take on major advertisers such as Facebook and Google has “largely been in vain,” with Oath accounting for less than 5% of U.S. online ad sales. In October, Oath reported a nearly 7% drop in quarterly revenue.

TechCrunch noted that the business has also been hit by a major data breach at Yahoo, while the shift of consumers to mobile apps and non-Oath properties has made the strategy of combining Yahoo with AOL “too little, too late.”

Under newly-appointed CEO Hans Vestberg, Verizon has been aggressively reviewing business units as part of a plan to save $10 billion by 2021 and focus on wireless technology. It announced Monday that 10,400 employees had accepted buyout offers and would leave the company by June 2019.

“With virtually no goodwill brand value, Oath’s overall value (assets and goodwill) is now worth half of what it was a few years ago,” CNN reported.

Image: Mike Mozart/flickr