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Verizon reportedly close to acquiring Yahoo for around $5 billion

A Yahoo sign at the company's headquarters in Sunnyvale, Calif.
A Yahoo sign at the company’s headquarters in Sunnyvale, Calif.
(Marcio Jose Sanchez / Associated Press)

Verizon is reportedly nearing a deal to purchase Yahoo for close to $5 billion, bringing to an end a months-long bidding process for a now-ailing company that was once an Internet trailblazer.

The sale of Yahoo’s core business is still being deliberated but could be announced early next week, according to Bloomberg.

Verizon has reportedly emerged as the leading bidder ahead of AT&T, Quicken Loans Inc. founder Dan Gilbert and private equity firms TPG and Vector Capital.

Founded as a guide to the Internet in 1994, Yahoo quickly grew from a Silicon Valley start-up to a tech giant. Its properties still attract more than 1 billion visitors a month, but the company has struggled to keep up with competitors Google and Facebook in search and advertising revenue and has lagged far behind as the industry moved to mobile.

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A turnaround plan implemented by Chief Executive Marissa Mayer has failed to win over investors.

Verizon, the nation’s largest wireless carrier, has been building itself into an online content business. Last year, it acquired AOL — one of Yahoo’s longstanding rivals — for $4.4 billion (Mayer rejected a deal to merge with AOL in 2015).

A purchase could open the doors for Verizon to generate additional revenue through Yahoo’s editorial properties, video services and advertising technology.

If the deal goes through, Verizon plans to combine Yahoo’s Internet assets with AOL, according to Recode.

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Verizon is perceived as a favorite because it sees the most value in Yahoo, said Rob Enderle, principal analyst with the Enderle Group.

Although Yahoo brings in revenue, its costs are too high. By joining forces with AOL, Yahoo’s costs would come down, he said.

It also would bolster Verizon’s stable of proven editorial properties — sites around which it can sell advertising.

“They are going for content,” he said. “One end goal is if you’ve got the content, you’ve got the ads.”

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Thanks to its AOL purchase, Verizon is now the owner of sites including the Huffington Post, Engadget and TechCrunch. With Yahoo, it would gain highly visited properties such as Yahoo News, Yahoo Finance and Yahoo Sports, among others.

Selling ads around these outlets, as well as Yahoo and AOL email products, could help Verizon carve out a spot as a leader in online advertising.

Verizon is not the only telecommunications company to expand into media. Comcast owns NBCUniversal and has made small investments in online news companies Vox Media and BuzzFeed.

“Verizon clearly wants to build a media center to rival Comcast’s positioning as being both a telco and a media company,” said Andrew Frank, an analyst with research firm Gartner, who isn’t surprised Verizon is emerging as the leading bidder. “Verizon understands that with Yahoo and AOL, it will have a portfolio approach to media and achieve greater scale.”

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Yahoo began its march toward a sale after the company failed to spin off its stake in Chinese e-commerce provider Alibaba, reportedly worth more than $32 billion, because of the possibility of incurring a capital gains tax.


UPDATES:

2:10 p.m.: This article was updated with additional reporting and context.

This article was originally published at 11:10 a.m.

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