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Yahoo! Dragged to Court for Delaying Data Breach News

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Yahoo! Inc.’s (YHOO - Free Report) streak of bad luck continues as the company has been sued for irresponsibility and negligence over a massive 2014 hacking incident. Many analysts consider this to be yet another blow to CEO Marissa Mayer's efforts to cure the company’s ailing fortunes.  

Two class-action specialist law firms Robbins Geller Rudman & Dowd and Labaton Sucharow have jointly filed a class action against the company on behalf of Ronald Schwartz, a New York resident and all other users in the U.S. whose personal information have been tampered with.

The Allegation

In a joint statement, attorneys from the two law firms said, “Yahoo’s failure to safeguard its users’ very personal, sensitive information, in direct violation of its promises, is utterly unacceptable in this day and age. The fact that a breach of this magnitude went undetected at a tech giant like Yahoo for two years is astounding.”

The lawsuit was filed in the federal court in San Jose California, just one day after Yahoo confirmed a massive breach of its security affecting about half a billion of its users.

The company confirmed that the stolen data included consumers’ names, email addresses, telephone numbers, date of birth, encrypted passwords and security questions and answers. However, sensitive information like unprotected passwords, payment card data and bank account information were not compromised with.

Many Questions Still Unanswered

The question that is bothering many is that did Yahoo not know about the situation until recently? If yes, then what took it so long to take stock of the situation? Is the company really capable of securing users data? Again, on what basis should one believe Yahoo’s claim of a “state sponsored" attack?

It’s hard to believe that the company did not know about this massive breach of security.  Probably by suppressing the matter for some time, it had tried to avoid additional troubles that could hamper its multi-billion dollar deal with Verizon Communications Inc. (VZ - Free Report) .

YAHOO! INC Price

 

Will it Impact the Verizon Deal?

Verizon is in the midst of finalizing a $4.8 billion deal to acquire Yahoo’s core assets. We believe that the disclosure could have a significant impact if Verizon finds a material adverse change (MAC) in the period between signing and closing. 

In response to the breach disclosure, Verizon stated that "We will evaluate as the investigation continues through the lens of overall Verizon interests, including consumers, customers, shareholders and related communities."

Zacks Rank

Currently, Yahoo is a Zacks Rank #3 (Hold) stock. some better-ranked stocks in the in the broader technology sector include Facebook, Inc. (FB - Free Report) and  LinkedIn Corporation , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Facebook witnessed eight positive estimate revisions in the last 60 days. LinkedIn saw three positive estimate revisions over the same timeframe.

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