Bronte Media

Wow. The WSJ reports that Verizon is seeking a seller for its directories unit that could net the company $17bn and is expected to happen next year.

The company is essentially betting on pay television and giving up on directory advertising and online search. My context is obviously heavily skewed, but what a monstrous strategic mistake.

I have never understood, having moved to America a few years ago, why US telcos have an almost laguna-beach-daughter relationship with their directories unit - treating it with indifference while plumbing it for cash to pay for their partying.

The graph in the WSJ shows a steadily declining revenue but these things are so profitable. Alone in 2003, Verizon cut the number of employees by a third. That’s right, one third! The businesses are to the stage now where they are just cash registers. There has been little investment in their online arms and overall product development (although to be fair, Verizon has done a lot more than anyone else). But even Verizon has decided to hawk it off (the others sold them to private equity firms a few years ago because the bankers came knocking after the telcos spent too much on fiber in 2000).

The option value on the online arm is worth at least a few billion alone. Sometimes I wish I was in private equity so that I could buy the whole thing, load up on debt, spin the print directories out into a separate entity, keep the sales force and charge an exhorbitant management contract with the print arm and focus on local online advertising with superpages.com. And then other times I realize that even if I was in private equity, the people I would be working for probably wouldn’t let me do that.