The deal announced Monday represents Mayer's boldest move yet since she left Google 10 months ago to lead Yahoo's latest comeback attempt. It marks Yahoo's most expensive acquisition since the Sunnyvale, Calif.-based company bought online search engine Overture a decade ago for $1.3 billion in cash and stock.
Yahoo is paying all cash for Tumblr, dipping into some of its remaining stash from a $7.6 billion windfall reaped last year from selling about half of its stake in Chinese Internet company Alibaba Holdings. Taking over Tumblr will devour about 20% of the $5.4 billion in cash that Yahoo had in its accounts at the end of March.
In trading Monday, Yahoo shares were up 0.7% to about $26.70 each.
The company says that "per the agreement and our promise not to screw it up, Tumblr will be independently operated as a separate business" with founder David Karp, 26, staying on as CEO.
Tumblr, a service started six years by Karp, a high school dropout, now figures to play a pivotal role in Mayer's attempt to reshape Yahoo. To take on the challenge, Mayer ended a highly successful 13-year career at Google, which she helped surpass Yahoo as the Internet's most influential company.
Since coming to Yahoo, Mayer has concentrated on improving employee morale, redesigning services and bringing in more engineering talent through a series of small acquisitions that have collectively cost less than $50 million.
Yahoo is scheduled to discuss detail of the acquisition Monday afternoon in New York, where Tumbl is based.
Mayer has been on an acquisition streak as part of Yahoo's efforts to reach a younger, more mobile audience.
Image-intensive social media platform Tumblr — popular among a younger crowd — aligns with that strategy.
Until now, Yahoo's deals have been mostly with smaller startups. In March, it announced it was scooping up social recommendation site Jybe and mobile news reader Summly, run by 17-year-old Nick D'Aloisio. It then said it would shut down Summly and incorporate it into existing Yahoo products.
Among its most recent announcements, mobile games developer Loki Studios this month said it would be coming into the Yahoo fold.
Mayer spoke briefly to USA TODAY late Friday after accepting an innovation award at a fundraiser in San Francisco for disadvantaged students.
"We're focused on building the service (with acquisitions) and enriching the customer experience," said Mayer, who added she will be at the New York event.
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