Verizon should ditch new Oath subsidiary, spin off Yahoo, AOL: Former Yahoo CFO Ken Goldman

  • Verizon placed two prominent but faded tech brands it acquired, AOL and Yahoo, into a subsidiary called Oath.
  • A former Yahoo CFO says that a better strategy would be to spin off these tech companies in a new publicly traded stock.
  • Verizon could retain 80 percent control and still execute on broader media strategy, and allow these brands to better innovate by being independent.

Verizon’s recently created media subsidiary housing the acquisitions of faded tech brands AOL and Yahoo was given a name that raised some eyebrows — Oath — and there has been speculation that a spinoff might still be coming. Among those who don’t get the name and think there are better corporate options include former Yahoo CFO Ken Goldman.

“I have a hard time getting my arms around that name. Sorry,” Goldman said on CNBC’s Squawk Box Tuesday morning.

But Goldman backs an idea Verizon management has been resisting: eliminating its new brand-name problem by spinning off AOL and Yahoo as a separate publicly traded company, while retaining an 80 percent ownership stake.

“I could tell you what I would do if I were in their shoes. … I would offload 20 percent,” Goldman said.

The former Yahoo CFO said motivating employees at the acquired companies would be a driver for the deal.

“Now you have a public company. You can give stock to those employees, so you can motivate those employees,” he said. “Let me put it into perspective. You’re an employee at Yahoo. You’ve been running this independent company for 20 years.”

Goldman said spinning off the media assets wouldn’t impede Verizon’s ability to use them strategically.

“You can get the best of all worlds. … You can work the distribution. If you want to put some of those sites directly on your phone, they can do that.”

It does not seem likely that Goldman’s opinion will sway Verizon management. It has been clear that a spinoff is not in the works. A Verizon spokeswoman referred questions to its most recent earnings conference call, when chairman and CEO Lowell McAdam said, “The questions around Oath — I don’t know where they’re coming from. There is no intention of spinning out Oath in any particular format. We see the synergies that we expected to see, and we see the future that we had hoped for. … The integration efforts that are going on, they are on schedule, and so we see no reason to do that, and there’s no credible report out there that are otherwise in my view. So I’d be clear about that.”

Tech ‘has never been as on fire’

The former Yahoo CFO thinks it is a very good time for initial public offerings in the technology sector. There has been a recent string of successful tech IPOs, showing that public valuations are again more competitive versus private valuations.

He said there are a number of very large companies that are primed to go public by 2019.

“Valuations for the first time in a long while are higher than their private valuations. So both the investors and the company and management can see the way when they go public now,” Goldman said.

Goldman is on the board of directors at cloud-based subscription management company Zuora, which went public at $14 a share in April and has doubled to near $28.

“I think technology, in particular in the Valley, has never been as on fire,” Goldman said. “You have mobility, you have AI, you have machine learning, the Internet of Things. There’s just so many things going on at one time.”

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