Verizon slashes offer price for Yahoo over data breaches

Last Updated Feb 21, 2017 3:10 PM EST

Verizon Communications (VZ) is slicing $350 million off its acquisition offer for Yahoo (YHOO) after the internet company revealed a series of data breaches affecting more than a billion customers.

The deal is now worth $4.48 billion, down from the $4.83 billion Verizon first proposed last summer. The buyout includes Yahoo’s core Internet businesses -- news, sports, entertainment, finance and email -- but excludes the company’s stake in Chinese e-commerce giant Alibaba (BABA) and certain company patents.

The deal is expected to close in the second quarter of 2017, Verizon said in a news release

An all-staff letter from AOL CEO Tim Armstrong, shared on Twitter, said he expects the deal to close within 10 weeks. (Verizon bought AOL in 2015.)

Notably, the revised transaction terms call for Yahoo and Verizon to share equally any future legal costs resulting from the data breaches. Yahoo will be solely responsible for liabilities stemming from shareholder lawsuits and any investigations by securities regulators. 

Yahoo disclosed in January that the U.S. Securities and Exchange Commission is looking into the data breaches. It also said the Federal Trade Commission, along other federal and state officials, were investigating.

“We have always believed this acquisition makes strategic sense,” Marni Walden, Verizon’s president of product innovation and new businesses, said in a statement announcing the new deal. “We look forward to moving ahead expeditiously so that we can quickly welcome Yahoo’s tremendous talent and assets into our expanding portfolio in the digital advertising space.”

Yahoo CEO Marissa Mayer called the move “an important step to unlock shareholder value for Yahoo” and said it would “accelerate Yahoo’s operating business especially on mobile.”

The security breaches, which took place in 2013 and 2014, raised concerns that Yahoo users might decrease their usage of the company’s email and other digital services that Verizon is buying. A smaller audience would make Yahoo less valuable because fewer people would see ads — the main reason that Verizon struck the deal seven months ago.

Yahoo has maintained that its users have remained loyal, despite any mistrust that might have been caused by the hacks and the lengthy delay in discovering and disclosing the attacks. Yahoo disclosed the hacks in September and December, three years after the first breach occurred.

Verizon’s willingness to accept some of the lingering risks from the breaches underscores the wireless carrier’s desire to become a bigger player in the digital advertising market, which is dominated by Google parent company Alphabet (GOOGL) and Facebook (FB).

Because most people already have smartphones, wireless carriers such as Verizon have turned to price cuts and promotions to lure customers. Under pressure, Verizon even recently restored unlimited data plans this month, robbing it of revenue from monster-size data plans.

Instead, Verizon is trying to make money off the hours people spend gazing at their phones. It bought AOL for $4.4 billion in 2015 for its advertising technology. Verizon now wants to bolster that with Yahoo’s technology, as well as its more than 1 billion users and popular websites.

The Associated Press contributed to this report.