Verizon Takes $4.6 Billion Charge Related to Digital Media Business

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 [e-mail] and Sarah Krouse at [e-mail]

(END) Dow Jones Newswires

December 11, 2018 09:44 ET (14:44 GMT)

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