Will Verizon Sell Oath to Tim Armstrong?

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A recent report at The Information indicates that Oath CEO Tim Armstrong is considering buying the company out of Verizon Communications Inc. (NYSE: VZ). Armstrong’s interest includes both the Yahoo portion of what is now the Oath and the part that was once known as AOL.

Verizon paid $4.4 billion for AOL in 2015 and $4.48 billion for Yahoo in 2017. The two companies were merged under Armstrong, the former AOL CEO, and were, for some unfathomable reason, renamed Oath.

At the time that Verizon announced the Yahoo acquisition, the telecom giant’s CEO, Lowell McAdam, said:

Just over a year ago we acquired AOL to enhance our strategy of providing a cross-screen connection for consumers, creators and advertisers. The acquisition of Yahoo will put Verizon in a highly competitive position as a top global mobile media company.

It is probably now safe to say that the $8.9 billion that Verizon shelled out on these two acquisitions did nothing of the kind.

So why would Armstrong want to buy out Oath? Probably because he thinks he can get a bargain price. McAdam is retiring as Verizon CEO at the end of this year and the incoming CEO, Hans Vestberg, is expected to focus Verizon’s future on 5G networks rather than on its media content.

Verizon said in January that it had no plans to do a huge media deal like AT&T’s $85 billion acquisition of Time Warner and the company’s chief financial officer reiterated that sentiment in May. With Disney and Comcast slugging it out over some Fox assets, there may not be much left at a reasonable price in any event.

Nothing Verizon has done in the year since it closed its acquisition for Yahoo has boosted Oath’s profile or value. The ill-named firm got more press coverage when it closed down AOL’s AIM messaging program than for any other single thing it’s done, and the incoming CEO’s background (he is currently Verizon’s chief technical officer) does not indicate renewed focus (and spending) on media. To Armstrong, all this signals that a bargain may be available. He could well be right, but if Oath is worth less now than it was a year ago, whose fault is that?