Yahoo’s Hack Material Endangered Verizon Deal

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Yahoo’s Hack Material Endangered Verizon Deal

Guest Speaker: Ryan Knutson “Verizon Executive Says Company Is Unsure About Yahoo Deal”

Carrier continues to study second data breach at Yahoo.

Weeks after Yahoo Inc. disclosed a second massive data breach, Verizon Communications Inc. is unsure whether it will proceed with its $4.83 billion purchase of the internet company’s core business, a top Verizon executive said Thursday.

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Marni Walden, a Verizon executive vice president, said the carrier is still studying the impact of a data breach at Yahoo that affected more than one billion accounts, which the internet firm disclosed in December. The hack occurred in 2013 and is separate from a 2014 breach, disclosed in September, that exposed 500 million Yahoo accounts.

When asked at an investor conference in Las Vegas whether the telecom giant would proceed with the deal, Ms. Walden said: “Unfortunately, I can’t sit here today and say with confidence one way or the other because we still don’t know.”

A Yahoo spokeswoman said: “We are confident in Yahoo’s value and we continue to work towards integration with Verizon.”

Ms. Walden’s comments echo statements other Verizon executives made last fall after the disclosure of the first breach. In October, Verizon’s top lawyer signaled it could consider that breach a material event that could allow it to change the deal terms. Before the second, larger hack was disclosed, Verizon was nearing an agreement with Yahoo to simply share in future hacking liabilities, rather than renegotiate the price.

But the larger hack derailed that plan, as Verizon must again wait to see what the impact of the new hacking disclosures have on Yahoo’s number of users. Verizon says it still has all options on the table, including renegotiating the deal’s price or walking away, people familiar with the matter have said.

2017-01-05t165928z_1_lynxmped0414a_rtroptp_3_yahoo-stocks_originalShares of Yahoo were up 3% to $41.24 in afternoon trading, while Verizon shares were little changed at $54.63.

There is still logic to acquiring Yahoo, said Ms. Walden, who oversees Verizon’s digital services and has been closely involved in the transaction. The idea is to expand Verizon’s audience so it has more advertising inventory. “The merits of that transaction still make sense,” she said. “There’s a lot of stuff we don’t know.”

Speaking on CNBC earlier Thursday, another Verizon executive, Tim Armstrong, said he is “hopeful that the deal will continue to go through.”

Mr. Armstrong, who runs the AOL business and was also involved in the Yahoo deal, said Verizon’s goals around adding more eyeballs is clear, and Yahoo is “one step in that process.”

Ryan Knutson
Ryan Knutson

Ryan Knutson is a reporter for The Wall Street Journal. Based in New York, Mr. Knutson writes about the telecommunications industry, including companies such as Verizon, AT&T, Sprint and T-Mobile. Before joining The Wall Street Journal, Mr. Knutson reported for a range of news outlets, including PBS FRONTLINE, ProPublica and The Daily Graphic of Ghana.

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