Verizon Takes $4.6 Billion Charge Related to Digital Media Business
December 11 2018 - 09:59AM
Dow Jones News
By Micah Maidenberg and Sarah Krouse
Verizon Communications Inc. is booking a $4.5 billion accounting
charge related to its Oath media business, a sign its bet on
high-profile internet properties and content several years ago
hasn't worked out as expected.
Verizon said in a securities filing Tuesday it expects to record
a noncash impairment of about $4.5 billion against Oath's goodwill,
canceling out the majority of the current goodwill balance.
Goodwill measures the difference between how much a company paid to
buy another firm and the value of the target firm's hard
assets.
Verizon spent more than $9 billion to create the Oath business
by acquiring AOL in 2015 and then Yahoo in 2017, two web pioneers
that were struggling to grow.
The planned write-down is another signal of how legacy digital
assets have struggled to compete in a digital-advertising market
dominated by Facebook Inc. and Alphabet Inc.'s Google.
"These pressures are expected to continue and have resulted in a
loss of market positioning to our competitors in the digital
advertising business," Verizon said in the filing. "Oath has also
achieved lower than expected benefits from the integration of the
Yahoo Inc. and AOL Inc. businesses."
The Wall Street Journal reported earlier this month the company
may write-down the value of Oath assets.
In the first nine months of 2018, Oath revenue totaled $5.6
billion, a sliver of Verizon's total $96.6 billion in revenue
during that period. Verizon in October said the unit's revenue was
likely to be flat in the near term, and that it didn't expect to
meet its goal of Oath generating $10 billion in revenue by
2020.
Oath houses media and technology brands, such as HuffPost,
Tumblr, Yahoo Finance among others. In September, the unit's
longtime leader Tim Armstrong, the former AOL CEO, said he would
step down at year-end.
Verizon executives are now trying to bolster revenue within Oath
by creating premium content and exploring e-commerce. While the
unit will still sell digital ads, it is trying to keep visitors on
its sites longer and make it easier for them to make purchases
through its web properties.
Oath leaders are in the throes of an effort called "Project
Purple" that aims to identify the strongest brands the unit houses.
That effort could result in some brands being closed or merged, The
Journal has reported.
Hans Vestberg, Verizon's new chief executive, recently
restructured the wireless carrier, creating a new Verizon Media
Group that houses Oath.
Verizon also disclosed Tuesday it would book a $1.3 billion to
$1.6 billion charge in the fourth quarter for a voluntary
retirement package that was accepted by more than 10,000 of its
workers.
Write to Micah Maidenberg at micah.maidenberg@wsj.com and Sarah
Krouse at sarah.krouse@wsj.com
(END) Dow Jones Newswires
December 11, 2018 09:44 ET (14:44 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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