What would Verizon gain from acquiring Yahoo?
Less than a year after entering the content business through its $4.4 billion acquisition of AOL, Verizon (VZ) is aid to be pondering a deal to buy ailing Yahoo (YHOO).
A bold move by the telecom giant to broaden its revenue stream, or a potentially pricey mistake?
Verizon and rival AT&T (T) are expanding into new businesses as growth in their core wireless operations slows. AT&T, the No. 2 wireless company, acquired satellite TV provider DirecTV for $48.5 billion last year and now is bundling the pay-TV service with its other offerings, such as high-speed Internet and phone.
But Verizon's interest in Yahoo is harder to figure, according to some analysts.
"It leaves you scratching you head a little bit," said Jeff Kagan, an independent telecommunications analyst. "AT&T is transforming the cable television industry with DirecTV and U-verse. That's a brand new, very exciting growth area that is forcing Comcast and all the other carriers to move in the same direction."
Reports of a possible tie-up between Yahoo and AOL, parent of The Huffington Post, have circulated for years. AOL chief Tim Armstrong told CNBC in 2015 that the idea was a "dead notion", with Yahoo CEO Marissa Mayer also reportedly against it as well.
But Bloomberg News reports that Armstrong is holding preliminary talks over a deal with Mayer, who is under pressure from activist investors to shore up Yahoo's sagging market value.
A Verizon spokesman declined to comment on any potential mergers and acquisitions.
For Verizon, adding Yahoo, which attracts about 1 billion users every month, would add sports, business news and other popular content that it could distribute to streaming customers.
Verizon also could tap Yahoo's deep reservoir of content for its Go90 mobile streaming service. The app lets users watch videos on their smartphones or tablets regardless of their wireless carrier.
When it was launched last year, Go90 had more than 8,000 titles. Since then, Verizon has signed deals with Walt Disney (DIS) and Sony (SNE) to procure more original content and reportedly is in the hunt for the streaming rights to the NFL's Thursday night's games.
In a conference call to discuss the company's most recent quarterly earings, Verizon Chief Financial Officer Frank Shammo said in late January that Go90 was attracting more viewers than the company had expected, though he declined to provide specifics. The company expects viewership to "grow substantially" in 2016 but doesn't expect Go90 to earn a profit for at least two years, he said.