Verizon will cut 15% of the combined workforce of Yahoo and AOL in a merger expected to close next week, resulting in an estimated 2,100 layoffs, a source familiar with the plans told the Los Angeles Times.
Yahoo's shareholders on Thursday approved the $4.5-billion sale of its core business to Verizon. The deal is expected to close by June 13, uniting Yahoo with longtime competitor AOL.
The layoffs will be spread evenly across AOL and Yahoo as Verizon looks to reduce redundancies and streamline operations, the source said. Employees in product or engineering roles will be the least affected.
Verizon has a simple goal in buying Yahoo: It wants to challenge Google and Facebook in the huge and lucrative field of digital advertising. But Verizon faces its own challenge in doing so, given that it will be competing against a slew of other companies also looking to break in.
Verizon wants to become a strong third choice for advertisers by adding Yahoo's popular sites and billion users to its own media business, which includes AOL and Verizon's homegrown go90 video service. It can place ads on those sites, and can also combine data from visitors to those sites with AOL's ad technologies and sales teams — and possibly also personal data from Verizon mobile customers such as location and other information — in order to better target ads at individuals.
AOL and Yahoo will retain their own brands and products, but internally the unified firm will be called Oath. It will be led by AOL Chief Executive Tim Armstrong.
Job cuts aren't a surprise — cost-cutting has been framed as a benefit of the deal. Laura Martin, senior analyst of entertainment and Internet at Needham & Co., said the pending layoffs imply that Verizon has determined the 85% of the business with the biggest upside.
"Verizon has decided what parts of the businesses they will keep and which ones they will shutter," she said. "The employees remaining will be centered in the businesses that will likely grow."
Yahoo shares jumped 10.2% to $55.71 on Thursday after shareholders approved the merger. Verizon stock closed at $46.19, down less than 1%.
The Associated Press contributed to this report.
2:50 p.m.: This article was updated with a closing stock price for Yahoo.
12:35 p.m.: This article was updated with comment from Laura Martin, senior analyst of entertainment and Internet at Needham & Co.
11:15 a.m.: This article was updated with confirmation about the number of layoffs from a source familiar with the matter.