This week, Verizon announced it would purchase AOL in a bid to dominate the streaming industry.
Verizon announced its plan to purchase AOL by stating that it would pay $50 a share for the company. When many people think of AOL, they think of the streaming dial up company from the 1990s. However, AOL actually has a lot of streaming online mediums and brings in over $600 million in revenue. When looking at the revenue and profit of AOL, the $4 billion price tag paid by Verizon looks like a good value. There are many different plans for Verizon in this acquisition from the standpoint of leveraging the services that AOL offers its customers through their streaming mediums.
In the announcement, Verizon said that AOL would be its own structure under the Verizon name brand. AOL has built its online medium through the years and the management at Verizon believes that they are best served continuing what they do best. This is also a welcome relief for the employees who work at AOL corporate. There are many different ways in which a person can lose their job through a merger or acquisition, but the fact that AOL will be its own structure is a good sign for employees that want to remain employed at AOL.
Upon news of the announcement, the share prices of AOL jumped about nineteen percent. This is a huge move for a stock with the large market cap of AOL. Shares of Verizon's stock prices were actually down slightly with the rest of the market. This was somewhat surprising. At the end of the day, it will be many years before it is known whether or not this was a good decision by Verizon.
When many people think of AOL, they think of dial up internet in the 1990's. After the internet bubble and crash, many people simply forgot about AOL as a company. When AOL and Time Warner merged, many people thought that it would be an unstoppable machine in the industry. However, in 2002, the company reported a huge loss of nearly $100 billion, and the two entities split apart. Since then, AOL has been on its own and has been building its brand and revenue base. Although it was thought to be dead, AOL turned its company around and now has revenues of over $600 million. Although the merger deal with Time Warner was historically bad, AOL has been able to shake that off and is now on the path to being acquired again. Many people are hoping that the merger with Verizon goes much better than the previous one with Time Warner.
Verizon is a huge company with tens of millions of customers in the United States. Although they are known as a giant in the cell phone and data industry, they are wanting to move in to other areas as well. Streaming media will continue to grow in double digits in the next couple of years, and Verizon wants to start getting a piece of that pie. There are billions of dollars to be made in the streaming media industry, and Verizon is hoping that the AOL piece of their business will be able to quickly pay off by helping them to expand in this industry. Only time will tell how well this deal will work out, but many experts in the industry are hoping that this merger works out much better than the previous one that AOL was involved in with Time Warner. The good news is that at the end of the day, Verizon is a profitable company that will be able to dump money into its new AOL branch if things start to go down unlike Time Warner in the internet bubble.
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