Verizon-Yahoo Merger's New Plan Starts With 2,100 Layoffs

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It’s the job of Verizon's Marni Walden to figure out how to make Yahoo and AOL work together.

With the $4.5 billion deal officially closed, changes at the telecom giant’s new division Oath are expected to come swiftly.

It has been more than a year since Verizon first announced its plan to acquire Yahoo for more than $4 billion, but with the deal finally closed Tuesday, changes at the telecom giant are expected to come swiftly.

First up: layoffs of about 15 percent of staff at both Yahoo and AOL — affecting about 2,100 employees in primarily administration and support positions — as part of the merger of the internet acquisitions into a new division dubbed Oath. "They're going to hit the ground running," says Macquarie analyst Amy Yong. "They have a clear vision for what they want to do." 

Oath CEO Tim Armstrong said on CNBC's Squawk Box on Wednesday morning that the layoffs are "mainly focused on us putting more resources toward the front end, towards the consumer side" and confirmed that they are taking place this week. 

Some of the first cuts have hit HuffPost, the news site started by Arianna Huffington and later sold to AOL. The publication reported on its own layoffs on Wednesday, indicating that 39 people had been let go. HuffPost's Washington bureau was especially impacted, with six journalists laid off, among them senior military correspondent David Wood, who won a Pulitzer Prize for the outlet in 2012. Huffington left the publication last August. Lydia Polgreen became editor-in-chief of HuffPost this year. An AOL spokeswoman declined to comment on layoffs at specific Oath brands. 

Several high-profile Yahoo names are departing, including CEO Marissa Mayer, who announced her resignation. Katie Couric, Mayer's biggest talent hire, is staying on for now, but her long-term plans are undetermined.

Verizon agreed to pay $4.8 billion for Yahoo in July 2016. But the telecom company pumped the breaks on the deal last fall after Yahoo disclosed that it had previously been the target of two massive security breaches, one of which affected more than 1 billion user accounts. Ultimately, Verizon decided to move forward with the deal but sliced $350 million off Yahoo's purchase price. 

The legacy internet giant has been an important piece of a content strategy that Verizon has been building up as it looks to find ways to expand its business beyond offering cellphone, internet and TV plans to consumers. Verizon wasn't known as a buyer of programming until a few years ago, when it struck a deal to stream NFL games to mobile subscribers and then launched ad-supported app go90, giving it a more robust library of video against which it can sell ads.

Oath, which is being led by CEO Tim Armstrong and will combine HuffPost, TechCrunch and Yahoo's brands, now will be key to the telecom's efforts to distribute that content across platforms. It could also be an effective platform on which to test new over-the-top video offerings. With the combination of AOL and Yahoo, the new unit has an audience of more than 1 billion, with a goal to reach 2 billion by 2020.

"AOL was a very effective ad platform," Verizon president Marni Walden, the executive in charge of the integration, told investors last Thursday. "The challenge was, they didn't have enough scale. Yahoo gives us that opportunity."

June 14, 1:42 p.m. Updated to include new information about layoffs at HuffPost. 

A version of this story first appeared in the June 14 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.