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 hacking
bombshells, disclosed after the two companies agreed on a sale, represent the
two biggest security breaches in internet history.
The breaches
raised concerns that people might decrease their use 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.
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 lower
sales price will cost Yahoo shareholders roughly 37 cents per share. But they
may also be responsible for substantial legal costs.
What's left
of Yahoo after the deal closes - an entity that will be called Altaba Inc. and
have stakes in Chinese e-commerce giant Alibaba Group and Yahoo Japan - will be
responsible for liabilities stemming from shareholder lawsuits and from the Securities
and Exchange Commission probe of Yahoo. Verizon and Altaba will split costs
from all other hack-related lawsuits and government investigations.
This
agreement "provides protections for both sides" and should help the
deal close by the end of June, Marni Walden, Verizon's head of product
innovation and new businesses, said in a statement. Yahoo shareholders have to
approve it.
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 many
users and popular websites devoted to sports, finance, entertainment and news.
Yahoo shares
rose 14 cents to $45.24 in morning trading Tuesday; Verizon stock added 22
cents to $49.41.
(AP)
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