The Strategist

Verizon-Yahoo deal may get scuttled

11/10/2016 - 15:33

Yahoo! is afraid that sale of the company’s core business to Verizon Communications for $ 4.8 billion is at risk due to data on 500 million users stolen back in 2014, according to Business Insider, with reference to a report filed by the Securities and Exchange Commission (SEC).

Mike Mozart
Mike Mozart
In addition, Yahoo! announced that it has received 23 lawsuits in connection with the data leakage. The document states that "there is no guarantee" that Verizon is ready to close the deal. Yahoo! has warned investors that the buyer "may try to terminate the purchase/sale contract agreement, or revise terms of the deal" because of incident with the user's data security.

This does not necessarily mean that Yahoo! expects termination of the agreement with the Verizon, says Business Insider. Companies are required to include in their reports information on possible risks. At the same time, the publication points out that previously Yahoo! has never publicly questioned the deal.

Earlier, general counsel of Verizon Craig Silliman spoke about need to get a full picture of consequences of hacking, which led to theft of user data.

"I thank that we have every reason to believe that the consequences have affected financial position of Yahoo!", - he explained. The hacker attack became public only after conclusion of the agreement between the two companies.

As representative of Yahoo! put it, the company continues to work on integration with Verizon. However, according to Silliman, if Yahoo! does not consider the hacker attack a basis for revision of the transaction, the company must provide evidence in favor of such a position. Yahoo! refused to comment on whether or not negotiations reduce cost of the transaction are underway.

"Frankly, we still are still investigating what was happening then, and whether it can be considered a significant factor to affect state of affairs", - Lowell McAdam, Head of Verizon, commented on the situation around the data leakage.

"I think we have enough reason to believe that this reason is essential at this point, and we expect that Yahoo! will show us all consequences of the incident", - said Silliman. 

Yahoo! also said that it has become a defendant in 23 lawsuits. "Plaintiffs claim to have suffered from acts or omissions in connection with the incident. They demand damages reparation in a form of money and other compensation" - commented Yahoo!. The company did not disclose volume of the claims, saying only that it is a substantial amount.

Yahoo! said that it spent $ 1 million to eliminate violations of data security in the last quarter. The company fears that diversion of these problems can lead to reduction in number of the service’s users.
Earlier in October, Internet company Yahoo! has published financial statements for the third quarter. The company’s profit doubled and exceeded market expectations.

During the reporting period of three months ended September 30, 2016, Yahoo! net income was $ 163 million compared to 76 million a year earlier. Revenues rose by 6.5% to 1.31 billion dollars. However, excluding commission for Internet traffic partners, revenues decreased by 14% to 857.7 million dollars.

Adjusted profit was 20 cents per share, up 6 cents above average forecast of analysts polled by Thomson Reuters I/B/E/S. They expected Yahoo! revenue at $ 1.3 billion.