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Is Verizon Responsible for Idearc’s Bankruptcy?

Idearc's Bankruptcy Caused by Verizon?My op-ed piece, “Idearc’s Chapter 11 Bankruptcy: Who’s Really Responsible?” published today on Search Engine Land, and in it I put forth my position that Verizon is responsible for spinning off the company with an unreasonably huge debt load, and the people ultimately paying the bill are the stockholders.

I describe in the article how Verizon spun off Idearc Media (division which publishes print phone books and operates Superpages.com among other online yellow pages), and set that company up to pay back some billions of dollars for its worth. Verizon then turned around and resold those debt instruments to other companies, fully divesting itself of ownership in the new, standalone company.

This sequence in of itself isn’t remarkable – it’s the normal process a company might go through when spinning-off part of itself to form a new company.

But, my contention is that it was done so in a highly irresponsible manner. Verizon had to know beforehand that print directory business was going into shrinkage mode, and that the debt repayment structure would simply be too much for the new company to be reasonably expected to be able to handle. If so, then this could be expected to be a form of fraudulent conveyance, and Verizon could be culpable.

Is my contention outrageous?

Well, even Idearc’s Chief Executive, Scott Klein, has been paraphrased by the Wall Street Journal as saying “Everyone was aware that ‘$9 billion was really more debt than this business could bear’”. So, Idearc was spun off with a majority of this debt from Verizon from the start – clearly set up to fail.

So far, I’ve seen maybe three different law firms filing class-action lawsuits against Idearc and its executives, based on the premise that the stock tanked due to them secretly changing policies, resulting in inflated-looking sales on the books for businesses with higher likelihoods of not paying for contracted advertising. But, I think the real culprit in all this is likely Verizon – they pushed off a part of the company with an untenable debt load, in large part to pay off debts incurred by Verizon FiOS (Verizon’s fiber optic network) expansion.

metric medical devices, inc.

Superpages to Factor CTR into Ad Rankings

I noticed that Greg Sterling just reported over at Search Engine Land that Idearc Media’s Superpages is going to begin factoring in ad click-through-rates into the measures used for ranking ads on the vast networks of sites where Superpages content appears. I was aware of this plan prior to my departure from Superpages, and I think it’s one of the cooler things my old teammates are developing.

Superpages.com

Naturally, this follows other major ad networks who do similar things. Google, for instance, has begun using quality scores to decide ad rankings and the pricing of the ads.

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Verizon to Spin-Off Verizon Information Services & Superpages.com

Verizon’s official announcement regarding the spin-off plans came out just a short while ago. Verizon Communications Corp. is spinning off the business unit that I work for, Verizon Information Services, and its local information website, Superpages.com.

The new company’s name is “Idearc Inc.”, and it will operate under marks of “Idearc” and “Idearc Media“:

idearclogo

 

I’m not allowed to make any sort of forward-sounding business statements in relation to this until the spin-off is completed, due to the usual SEC rules. This is one of the common-sense limits one must place on one’s self, if one is an employee who happens to blog in one’s personal time! :-) (Wow! That sounded inhuman and recursive, didn’t it!) While I am an employee of VIS, I’m not speaking here in any sort of official capacity for my company, and any interpretations I place here are completely my own viewpoint. Obviously, nothing I say should be used in making stock purchase/sale decisions!

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Idearc-Media

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