Verizon conceded its media and advertising business Oath is floundering, as the operator drastically cut its estimate of the unit’s worth from $4.8 billion to just $200 million.
In a regulatory filing, Verizon said Oath faced “increased competitive and market pressures throughout 2018” and came away with “lower than expected” revenue and earnings as rivals scooped up the digital advertising dollars Oath was trying to win.
Those headwinds are expected to continue in the coming years, it added, prompting “unfavourable adjustments to Oath’s financial projections”.
As a result, Verizon said it planned to record a $4.6 billion non-cash goodwill impairment charge for the business in the current quarter. The operator previously estimated Oath’s goodwill balance, or the value of its intangible assets, at $4.8 billion.
Verizon also noted in the SEC filing it expects additional charges of $1.8 billion to $2.1 billion in the current period related to the exit of thousands of employees at the end of the year. Close to half of 10,400 workers who accepted a voluntary severance package are expected to depart this month.
The latter charge, however, is expected to be offset by a one-time $2.1 billion tax benefit from an internal restructuring initiative.
The re-evaluation of Oath’s worth follows several tough months for the unit, which have seen the departure of former CEO Tim Armstrong in October; charges of $120 million related to the division in Q2; and a 7 per cent year-on-year drop in Oath revenue to $1.8 billion in Q3.
It remains unclear what role Oath will play in Verizon’s future with its hopes in the advertising space seemingly dashed.
Former Verizon CEO Lowell McAdam and Amstrong oversaw Oath’s creation following the operator’s $4.48 billion acquisition of Yahoo in 2017, but new CEO Hans Vestberg shifted the focus back to the network in preparation for 5G opportunities.Subscribe to our daily newsletter Back