- Noam Galai/Getty Images for TechCrunch
- Verizon expects to write down the value of Oath in the fourth quarter of this year by $4.6 billion.
- It’s the result of competitive pressures in the digital ad business.
- The integration between Yahoo and AOL never achieved the benefits Verizon anticipated, according to the company’s regulatory filing.
Verizon expects to write down the value of its Oath business by $4.6 billion in the fourth quarter of 2018.
In a Securities and Exchange Commission filing on Tuesday, Verizon said it expected the write-down because of competitive pressures in the digital ad business and an integration between Yahoo and AOL that never achieved the benefits Verizon anticipated.
Oath’s goodwill balance, an accounting measure that reflects the intangible value of an acquisition, has been practically extinguished. It will drop to roughly $200 million after the write-down from $4.8 billion. Verizon paid about $9 billion to acquire the two companies, which it valued at closer to $10 billion on its balance sheet before the write-down.
“The new leadership at both Oath and Verizon completed a comprehensive five-year strategic planning review of Oath’s business prospects resulting in unfavorable adjustments to Oath’s financial projections,” Verizon said in an 8-K filing.
The Oath business unit – a combination of technology and media assets gained through a 2015 AOL acquisition and a 2017 Yahoo acquisition – has seen seismic changes in its roughly one year of existence.
Tim Armstrong stepped down as CEO of Oath in October. Armstrong had been at Verizon since it acquired AOL and helped shepherd the acquisition of Yahoo. In his place is Guru Gowrappan, the former Oath president and chief operating officer. The leadership in place at the company has been a revolving door of executives, with three CFO changes and other leadership positions left vacant.
The integration of AOL and Yahoo has never been on solid footing as a result of this high employee turnover, according to former Oath employees who spoke with Business Insider.
In the third quarter of 2018, Oath reported revenue of $1.8 billion, down 6.9% from a year prior. Verizon said that it expected revenue to be “flat in the near term” and that it wouldn’t meet its previously stated goal of $10 billion in revenue by 2020.
In November, Verizon CEO Hans Vestberg reorganized the business that was split between wireless and wireline businesses and created three main business segments: Verizon Consumer Group, Verizon Business Group, and Verizon Media Group. The company has announced that 10,400 employees have accepted buyout packages and will leave the company in 2019.