Posted On: 5/18/2015 10:53 AM
Verizon and AOL Merger
Verizon just paid a staggering amount for AOL all in CASH. Verizon may have bought a company that is remembered for “You’ve got mail,” but keep in mind AOL was a pioneer in the Internet.
The $4.4 billion all-cash deal for AOL isn’t the first time that AOL’s assets were thought to be valuable. AOL fell from glory when it was bought by Time Warner. Time Warner wanted to gain access to a community of people who loved the Internet. Time Warner didn’t want to reinvent the wheel. Disaster followed and Time Warner spun off AOL.
Why Is There A Verizon and AOL Merger?
Now Verizon wants AOL. Why? According to the New York Times (by David Gelles May 12, 2015) “AOL may lag behind, but Verizon is looking to gain the company’s powerful but little-known mobile video and advertising technology. That could make Verizon’s own phone and Internet offerings more appealing to consumers and to advertisers.”
The article continues, “Once again, the way consumers are consuming content and advertising is undergoing an epochal change. But instead of aiming at desktop computers, Verizon and AOL want to put content and new advertising technology on today’s most ubiquitous computing device, the mobile phone. The motive is clear. Consumers are increasingly watching videos — from YouTube to HBO — on mobile phones, tablets and laptops. And big media companies and advertisers are only beginning to grapple with this rapidly evolving market.”
What Does the Verizon and AOL Merger Mean For Investors?
Does this merger create another opportunity in considering owning Verizon stock? Since the company was formed in 2000, when Bell Atlantic and GTE merged to form Verizon, it has gained a leadership role in the wireless industry. OMC has been a long time investor in Verizon for many reasons. The company pays a generous dividend for investors seeking income. Verizon also generates over $100 Billion in annual revenues and has over 100 Million retail customers and 95% coverage of the U.S. population. Adding AOL will bring another 2 million prospective users.
I anticipate that Verizon will still be a premier investment even though whenever you merge two companies there are always growing pains. You may want to do some research into this company if you don’t currently own it.
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