Verizon (NYSE: VZ) expects to write down the value of its Oath business by $4.6 billion in the fourth quarter of this year. The company made the declaration in a Securities and Exchange Commission document filed on Tuesday. The Oath business houses AOL, Yahoo and other media businesses like the Huffington Post.
Verizon is claiming that the media division is less valuable than previously thought and has adjusted its financial projections as a result. The company wrote in the filing: “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.”
The Oath business unit is a combination of technology and media assets gained through the acquisition of AOL in 2015 and Yahoo acquisition in 2017. Verizon paid about $9 billion to acquire the two companies. The move will erase almost half the value of the division. The unit still has about $5 billion of assets remaining.
In November, Verizon CEO Hans Vestberg reorganized the company into three main business segments: Verizon Consumer Group, Verizon Business Group, and Verizon Media Group. The company signaled that it was shifting away from using the Oath brand last month. Guru Gowrappan was named CEO of the media division.
The benefits Verizon anticipated from the integration between Yahoo and AOL never came to pass, according to the filing. In the third quarter of 2018, Oath reported revenue of $1.8 billion. That was 6.9 percent lower than what was reported in the same quarter of 2017. Verizon said that it expected revenue to be “flat in the near term” and that the division wouldn’t meet a previously stated goal of $10 billion in revenue by 2020.
Verizon is also making other cuts as the carrier seeks to save $10 billion in cash by 2021. The company has announced that 10,400 employees have accepted buyout packages and will leave the company by June 2019. That is about 6.8 percent of its staff. The voluntary buyouts will result in a charge of as much as $2.1 billion, which will be offset by a $2.1 billion tax benefit in the fourth quarter, the company said.
Verizon’s shares rose 1.6 percent after the announcements. Its shares have gained nearly 12 percent for the year.