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| Yahoo (The Total Investment & Insurance Solutions) |
Yahoo is taking a $350 million hit on its previously announced $4.8
billion sale to Verizon in a concession for security lapses that exposed personal
information stored in more than 1 billion Yahoo user accounts.
The
revised agreement announced Tuesday eases investor worries that Verizon
Communications Inc. would demand a discount of at least $1 billion or cancel
the deal entirely. The Total Investment
& Insurance Solutions
The hacking bombshells, disclosed after the two companies agreed on a
sale, represent the two biggest security breaches in internet history. The Total Investment & Insurance
Solutions
Under the amended deal, Yahoo will be responsible for 50 percent of any
cash liabilities incurred following the closing related to government
investigations and lawsuits related to the breaches. Liabilities arising from
shareholder lawsuits and SEC investigations will continue to be the responsibility
of Yahoo. The Total Investment &
Insurance Solutions
"The amended terms of the agreement provide a fair and favorable
outcome for shareholders," said Marni Walden, Verizon executive vice
president and president of product innovation and new businesses. "It
provides protections for both sides and delivers a clear path to close the
transaction in the second quarter."
The Total Investment & Insurance Solutions
The security breaches raised concerns that people might decrease their
usage of Yahoo email and other digital services that Verizon is buying. A
smaller audience makes Yahoo's services less valuable because it reduces the
opportunities to show ads — the main reason that Verizon struck the deal seven
months ago. The Total Investment &
Insurance Solutions
Yahoo has maintained that its users have remained loyal, despite any
mistrust that might have been caused by its lax security and the lengthy delay
in discovering and disclosing the hacks. The separate attacks occurred in 2013
and 2014; Yahoo disclosed them this past September and December. The Total Investment & Insurance
Solutions
Avoiding an even larger reduction in the deal value represents a small
victory for Yahoo CEO Marissa Mayer, who had already been under fire on Wall
Street for her inability to turn around the company and then for the
humiliating security lapses that came under her watch.
Verizon's willingness to accept some of the lingering risks from Yahoo's
security breaches underscores the wireless carrier's desire to become a bigger
player in the digital advertising market. Google and Facebook currently
dominate, but Verizon believes there's room to grow.
Because most people already have smartphones, wireless carriers such as
Verizon have turned to price cuts and promotions to lure customers from each
other. Under pressure, Verizon even restored unlimited data plans this month,
robbing it of revenue from monster-size data plans.
Instead, Verizon is trying to make money off the hours people spend
gazing at their phones. It bought AOL for $4.4 billion in 2015 for its
advertising technology. Verizon now wants to bolster that with Yahoo's
technology, as well as its more than 1 billion users and popular websites
devoted to sports, finance, entertainment and news. The Total Investment & Insurance Solutions
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