Verizon's $4.8bn Yahoo deal delay as a result of data breach

Mayer says ‘future looks bright’ but acquisition will not close on schedule.

Verizon’s $4.8bn acquisition of Yahoo’s core business will be delayed until the second quarter, the internet company said on Monday, after Yahoo disclosed two vast hacks since the deal was announced in July 2016. 
Yahoo said it was working on “integration planning” with the telecoms group but no longer expected the deal to close in the first quarter. Instead, it now expects the acquisition to be completed “as soon as is practicable in the second quarter”. Verizon, which reports its earnings before the bell on Tuesday, has previously said the breaches give it grounds to renegotiate the deal. Yahoo is being investigated by the US Securities and Exchange Commission for its failure to disclose a massive data breach even as it pursued a sale of its core business. The regulator opened a formal investigation in December, according to a former commission official, one month after Yahoo said it was co-operating with agencies seeking information about the hacks.

Marissa Mayer, Yahoo chief executive, declared the future looked bright for the internet company once the deal closes, as she announced earnings and revenues for the fourth quarter that beat analysts’ expectations. She said she was proud of her team’s execution through a “uniquely eventful past year”, when it discovered shortly after signing a deal to sell the core of the company to the telecom company that it had been the victim of data breaches affecting up to a billion accounts. “In addition to integration planning, our top priority continues to be enhancing security for our users,” Ms Mayer said. “With security protocols and password changes in place, approximately 90 per cent of our daily active users have already taken or do not need to take remedial action to protect their accounts, and we’re aggressively continuing to drive this number up.” Yahoo has said that users have not been put off its services because of the hacking. On Monday, it released statistics that showed little change in how engaged users were before and after the announcement of the second hack in December. 

These followed similar statistics it published last quarter to show that its initial disclosure of a hack on 500m user accounts had no impact on usage. Shares in Yahoo, which are up almost 10 per cent so far this year, rose 0.7 per cent to $42.70 in after-hours trading. Yahoo reported non-GAAP earnings per share of 25 cents for the fourth quarter, higher than analyst forecasts of 21 cents, and net income of $162m. Revenue of $1.46bn beat the consensus forecast for $1.4bn. But excluding the impact of a change in the way revenue is presented because of an amendment to Yahoo’s search agreement with Microsoft, revenue would have fallen 8 per cent year on year to $1.2bn. 

 The cost of revenue, a measure closely watched on Wall Street, rose 87 per cent to $509m under the new presentation, but would have fallen 24 per cent to $207m under the old system. For the full year, Yahoo reported a 4 per cent increase in revenue to $5.2bn and non-GAAP earnings up 5 per cent to 62 cents per share. During the quarter, Yahoo made preparations for the spin-off including renaming the rump of the company Altaba, which will include its Alibaba shares, and announcing that Ms Mayer will not serve on its board.

Credits: A Financial Times Report