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Verizon (VZ) Claims a Billion Dollar Discount on Yahoo Deal


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Verizon Communications Inc. (VZ - Analyst Report) is reportedly claiming a $1 billion discount on its Yahoo! Inc. (YHOO - Analyst Report) acquisition deal, thanks to the latter’s hacking scandal. The telecom giant has entered into an agreement to purchase Yahoo’s core assets for $4.83 billion. However, owing to the recent disrepute, Verizon is bargaining for a downward adjustment to the tune of $1 billion. However, Yahoo is reportedly against providing any discount. In fact, Yahoo has stated that Verizon was notified of the issue immediately while the latter claims to have limited information about the matter. 

The Scandal

This September, Yahoo revealed that at least 500 million of its user base has been hacked in 2014. Additionally, several media reports exposed Yahoo’s attempts to spy on customers on the behalf of U.S. intelligence agencies. This led to massive criticism of the company by stakeholders who were kept in the dark. Several U.S. senators are now calling for a detailed investigation by the Securities Exchange Commission (SEC) regarding Yahoo’s fulfillment of obligations to its investors.

The Bottom Line

Yahoo has a large user base with one billion monthly active customers, including 600 million mobile users. Yahoo Mail also has about 280 million users, making it the busiest segment of the site. Verizon’s purchase of Yahoo was mainly aimed at monetizing this user base through mobile advertising and challenging Alphabet Inc. and Facebook Inc.’s (FB - Analyst Report) dominance in this space. However, if Yahoo’s user base takes a hit due to the aforementioned scandals, Verizon's plans will surely take a backseat.

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