Media Moves

Coverage: Verizon negotiates lower price for Yahoo

February 16, 2017

Posted by Chris Roush

VerizonVerizon Communications Inc. is close to a deal with Yahoo Inc. that will cut up to $300 million off its $4.8 billion purchase price of the internet search engine, according to business news media reports Wednesday.

David Shepardson and Jessica Toonkel of Reuters had the news:

Since last year, Verizon had been trying to persuade Yahoo to amend the terms of the acquisition agreement to reflect the economic damage from two cyber attacks. A source told Reuters that the deal, which could come as soon as this week, will entail Verizon and Yahoo sharing the liability from potential lawsuits related to the data breaches.

Another person familiar with the situation said the price cut was likely to be around $250 million, a figure that Bloomberg reported earlier on Wednesday.

A representative from Verizon declined to comment. Yahoo did not immediately respond to requests for comment.

“Maybe this isn’t quite as much of a discount as initially thought, but it’s at least something,” said Dave Heger, senior equity analyst at Edward Jones.

Verizon hopes to combine Yahoo’s search, email and messenger assets, as well as advertising technology tools, with its AOL unit, which Verizon bought in 2015 for $4.4 billion. Verizon has been looking to mobile video and advertising for new sources of revenue outside an oversaturated wireless market.

Kara Swisher of Recode notes that the new deal could protect Verizon from future security breaches:

Earlier today, in fact, Yahoo warned some users of a breach it had previously disclosed in late 2016 (this is different from another in 2013 and another in 2014), noting that it was a “forged cookie” attack. Forged cookies allow access to some user information without passwords having to be re-entered.

The new breach warning today caused some to make some funny cracks at Yahoo’s expense, like this one:

It was extensive hacking, first reported by Recode late last year, that caused a snag in the closing of the deal for the telco giant to buy Yahoo. Since then, more serious security issues have been disclosed. It was yet another bump in the rocky road for the company, which had failed in yet another turnaround attempt, this time by CEO Marissa Mayer.

The sale to Verizon, after an auction among several possible buyers, was considered a victory of sorts. But it has been tarnished by news of serious breaches of Yahoo’s user data, including birth dates and passwords.

The hacks, which occurred during Mayer’s tenure, have already set off a round of lawsuits, as well as several government investigations.

Michael Nunez of Gizmodo notes that the cut is not much compared to the deal’s total value:

All things considered, $250 million isn’t very much money for either company. Even the higher estimates—Reuters reported the figure could be as much as $350 million—are pretty paltry. It’s barely 5 percent of the total value—pocket change for these titans of the industry. “I am surprised the deal was only cut by $250 million,” Jeff Kagan, an independent industry analyst, told the Washington Post.

But that really doesn’t change the fact that this whole saga is one of the most depressing business stories in recent memory. Yahoo has been beleaguered by a set of controversies stemming from its hacking scandals, unhappy media personalities, and questionable moves of its CEO, Marissa Mayer.

Thanks to Mayer’s failed resuscitation plans for Yahoo—which involved pricey acquisitions, huge layoffs, splashy hires, and a complete disregard for users’ security—the aging tech giant had been stumbling over its own feet for some time. Even its highest paid employees don’t use Yahoo services.

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