Will Verizon Digital Media Arm Cut Jobs Post "Oath" Taking?

U.S. telecom behemoth, Verizon Communications Inc.’s (NYSE:VZ) to-be-formed digital media unit – Oath – is reportedly going to sack nearly 1,000 employees, post the completion of Verizon – Yahoo! Inc. (NASDAQ:YHOO) deal worth $4.48 billion. The dismissal accounts for less than 20% of the combined companies’ total employees. This reported lay-off is nothing unnatural, given that both companies have a lot of redundancies, including human resources, finance, marketing and general administration.

In Apr 2017, Verizon Communications unveiled its plans to unite AOL Inc. with Yahoo’s core internet assets under one umbrella – Oath. AOL Inc. – a major player in the digital content and online advertising space – was acquired by Verizon in Jun 2015.

The Verizon – Yahoo deal is expected to be completed by the end of the current quarter of this year (by Jun 30, 2017). A special meeting for Yahoo’s shareholders’ approval for the same is scheduled at today’s date.

Oath is expected to be Verizon’s new company overseeing Yahoo and AOL, including more than 20 brands. Verizon Communications pre-estimates to have 1.3 billion users and $7 billion in sales from the combined AOL and Yahoo. The new unit will be headed by AOL Chief Executive Officer (CEO) Tim Armstrong, who will also become the CEO of Oath. The CEO has chalked out plans to increase Oath's combined user base from 1.3 billion consumers to 2 billion and achieve sales in the range of $10 billion to $20 billion by 2020.

Neither Verizon nor AOL commented anything related to the potential layoffs but acknowledged that changes will be there.

Price Performance and Zacks Rank

Verizon’s plans of diversifying its business model from communications, technology, wireless industry, Internet of Things (IoT) into digital media, advertising and content creation, distribution and deployment of high-speed fiber network, have been grabbing the attention of investors.

Despite such profitable and booming business prospects, the price performance of Verizon is depressing. Over the past three months, share price of Verizon declined 5.66% compared with the Zacks categorized Wireless National industry’s fall of 4.63%.

We believe continued operation in the saturated and competitive wireless market, expenses related to promotions and discounts, an intensely competitive video market and persistent losses in access lines (in its wireline segment) might have caused the company’s below-par performance.

Currently, Verizon Communications is a Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Latest Updates on Verizon

Verizon Communications has inked a managed services deal with Ericsson (NASDAQ:ERIC) wherein the latter will be deploying Verizon's Managed Software Defined Wide Area Network (SD WAN) to transform its corporate IT environment toward a virtual services implementation.

Meanwhile, Verizon Communications is also reportedly considering a strategic option to invest $100 million in online music streamer Pandora Media Inc. (NYSE:P) .

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