Verizon-Yahoo Deal May Close Discount After Revelation Of Hacks

2017-02-17 14:21 Posted by: Judy in News Go to Comment

Verizon Communications Inc. has been trying to renegotiate the terms of the acquisition agreement between Verizon and Yahoo Inc. since Yahoo’s revelations of two detrimental cyber-attacks. People who are aware of the deal negotiations claim that the original agreed price of $4.83 billion will see a drop of almost $250 to $350 million.

Verizon is emerging as an ambitious entity aiming at coalescing Yahoo’s original search, email and messenger assets along with its AOL unit which the company had acquired in 2015 for $4.4 billion. With the Yahoo deal nearing a closure, Verizon is looking forward to explore the world of mobile videos and advertising as a fresh source of revenue which aims at targeting beyond the competitive wireless markets.

Once the deal closes, Yahoo will rename the entity that remains with it as Altaba Inc. and as a part of the agreement, the two companies will take equal responsibility for all legal proceedings regarding the breaches. Most of the information is filtering through sources who prefer not to be identified. The curiosity amassing around the deal continues to grow as people closely associated with the deal said that the announcement of the new agreement may be made public in a few days or weeks. The two companies are still discussing the terms of the agreement and the revisions are not final yet. This means that we can expect more changes or maybe nothing may change at all.

For those unaware of the breaches that have led to the anticipated discounts, Yahoo had announced in December last year that cyber thieves had hacked into Yahoo’s servers to siphon confidential customer details like e-mail addresses, dates of birth and scrambled account passwords. The magnanimity of the risk lies in the fact that these details can be used to gain access to not just Yahoo accounts but these can also be misused elsewhere online.

While Yahoo users braced for the impact that this may have had on their accounts, the announcement was followed by news of another breach n 2014 which affected almost 500 million customer accounts. A probe launched by the U.S. Securities and Exchange Commission is currently trying to establish if Yahoo should have withheld information regarding the breach for so long.

The data obtained during the breach led to the unauthorized access of accounts for many Yahoo users in 2015 and 2016. The company sent a warning to these users on Wednesday to inform them of the breach.

While Yahoo shares have seen a rise of 1.5% to $45.69 in afternoon trading, Verizon shares suffered a decline of 0.7% to stand at $47.93.

While Yahoo and Verizon are being tight-lipped about the ongoing revisions to the original agreement, shareholders and people who are familiar with the deal have been anticipating an announcement soon regarding the revised agreement.

Yahoo had announced last month that the deal closure will be delayed till the second quarter so that the company can identify the impacts of the breach and also fulfil the closing conditions agreed by Yahoo and Verizon. The acquisition was first announced in July and the companies expected to complete the sale by the first quarter of 2017.

Verizon’s ambitions to grow beyond a wireless organization led to talks of acquisition. With Yahoo’s billion users, the popular wireless company will be able to expand its markets and explore new areas of revenue. With revelation of the breach, Verizon has been talking to Yahoo about a substantial discount or a termination of the agreement. Announcement regarding the attack has led to a lot of speculation regarding Yahoo’s security efforts, rising concerns from regulators and prompting lawsuits against the company.

Marissa Mayer, Yahoo’s CEO, has been under a lot of pressure to ensure that the agreement leads to the closure of the deal with Verizon soon. She was leading the company at the time of both the cyber-attacks. Her eventual failure in ensuring that the company said afloat caused Yahoo to initiate a bidding process that was subsequently won by Verizon.

Yahoo claimed that the security breach that took place in 2013 had gone unidentified and it came into knowledge only when forensic experts looked further into an intrusion and the company was warned of a potential breach by law enforcement investigators.

Security threats of such a big scale are yet to be disclosed. And this is probably why the company explained that it is co-operating with federal officials as well as state and foreign government spokespersons who are trying to gain information regarding the hacks. After news of the second hack, a White House spokesperson informed that the Federal Bureau of Investigation was going to look into the details of the hack as well.

With Yahoo’s huge user base, Verizon expects to be able to grow its presence in markets other than the wireless market. With a closure getting closer, people await announcements regarding the deal. 

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