The internet and telecom landscape became a very interesting place on Tuesday as Verizon announced it is buying AOL for $4.4 billion, or about $50 a share.
Verizon said the deal is part of a “new focus on digital and video platforms, as well as the “Internet of Things””.
“This acquisition supports our strategy to provide a cross-screen connection for consumers, creators and advertisers to deliver that premium customer experience,” said Verizon CEO Lowell McAdam.
While Verizon provides access to internet content,AOL, one a pioneering Internet brand, now provides that content via several media businesses, including The Huffington Post, TechCrunch, Engadget, MAKERS and AOL.com.
These assets appear to dwarf the roughly two million people still using the company’s dialup connection, suggesting that Verizon sees the writing on the wall – its internet business will be a utility, which it will not be able to price gouge and extort content owners for premium delivery speeds.
Instead, it seems, the company must move into content businesses and away from its internet access business.
AOL will become a subsidy of Verizon while CEO Tim Armstrong will remain in his post after the deal is done, at least for the moment. The deal is worth tens of millions to Mr. Armstrong, who owns significant portions of AOL stock, in addition to a lucrative golden parachute package.
Armstrong said on CNBC on Tuesday that AOL is “as big as it can possibly be in today’s landscape” and that the merger would propel the company into “a space where there are going to be massive, global-scale networks.”
The merger is subject to regulatory approval and is expected to close this summer.