Yahoo delays sale of core business to Verizon

Yahoo said in September last year that hackers in 2014 stole personal data from more than 500 million accounts. It also revealed another cyber attack in December, this one dating from 2013, hitting more than a billion users.
Yahoo said in September last year that hackers in 2014 stole personal data from more than 500 million accounts. It also revealed another cyber attack in December, this one dating from 2013, hitting more than a billion users.PHOTO: REUTERS

Failure to report two hacks of user accounts on time has put $6.8 billion deal in jeopardy

SAN FRANCISCO • Yahoo said its US$4.8 billion (S$6.8 billion) deal to sell its core Internet assets to United States telecommunications titan Verizon has been delayed by several months.

The target originally set for this quarter has been pushed into next quarter due to "work required to meet closing conditions", the online pioneer said on Monday, adding that it was "working expeditiously to close the transaction as soon as practicable".

The news came in an earnings release showing Yahoo swung to a profit of US$162 million in the final three months of last year.

The deal with Verizon, which would end Yahoo's run of more than 20 years as an independent company, has been thrown into doubt following disclosures of two huge data breaches.

Yahoo said it is ramping up security as it grapples with the aftermath of epic hacks.

"Our top priority continues to be enhancing security for our users," Yahoo chief executive Marissa Mayer said.

HAVING SECOND THOUGHTS?

The bigger things are the breaches - those have Verizon reconsidering the deal. I think the merger is at risk. The delay would point to that as still a possibility.

ANALYST ROB ENDERLE of Enderle Group.

She noted that about "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 boasted having more than a billion users monthly last year, with more than 650 million of those people connecting from mobile devices.

The US Securities and Exchange Commission (SEC) has opened an investigation into whether Yahoo should have informed investors sooner about two major data breaches, The Wall Street Journal reported on Sunday, citing people familiar with the matter.

US law requires companies that fall victim to such hacks to disclose them as soon as they are deemed to affect stock prices.

Yahoo announced in September last year that hackers in 2014 stole personal data from more than 500 million of its user accounts. It admitted to another cyber attack in December, this one dating from 2013, affecting more than a billion users. The SEC's probe is focusing on why it took Yahoo several years to reveal the 2013 and 2014 attacks.

The data breaches have been a major embarrassment for a former Internet leader that has failed to keep up with Google, Facebook and other rising stars.

The cyber attacks and how notifying users was handled have also raised concerns by investors that Verizon may seek to pay a lower price or even back out of the deal.

When companies are in the process of being acquired, earnings that hit or surpass targets typically do not knock matters off course.

"The bigger things are the breaches - those have Verizon reconsidering the deal," analyst Rob Enderle of Enderle Group told Agence France-Presse. "I think the merger is at risk. The delay would point to that as still a possibility."

Yahoo shares were up a little more than 1 per cent to US$42.88 in after-market trades that followed the release of the earnings figures, which topped Wall Street expectations.

AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on January 25, 2017, with the headline 'Yahoo delays sale of core business to Verizon'. Print Edition | Subscribe