Verizon Communications Inc. (VZ - Analyst Report) has dismissed reports of claiming discount on its Yahoo! Inc. (YHOO - Analyst Report) acquisition deal due to the latter’s hacking scandal. Terming the reports as ‘total speculation’, Verizon stated that Yahoo’s core assets are fairly valued.
The telecom giant has entered into an agreement to purchase Yahoo’s core assets for $4.83 billion. However, owing to the recent disrepute, there were numerous reports that stated that Verizon has been bargaining for a downward adjustment to the tune of $1 billion.
In Sep 2016, Yahoo revealed that at least 500 million of its user base had 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 has about 280 million users, making it the busiest segment of its business. 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.
Both Verizon and Yahoo currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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