Yahoo salvages Verizon deal

Photo: The Canadian Press

Yahoo is taking a $350 million hit on its previously announced $4.8 billion sale to Verizon in a concession for security lapses that exposed personal information stored in more than 1 billion Yahoo user accounts.

The revised agreement announced Tuesday eases investor worries that Verizon Communications Inc. would demand a discount of at least $1 billion or cancel the deal entirely.

The hacking bombshells, disclosed after the two companies agreed on a sale, represent the two biggest security breaches in internet history.

Under the amended deal, Yahoo will be responsible for 50 per cent of any cash liabilities incurred following the closing related to government investigations and lawsuits related to the breaches. Liabilities arising from shareholder lawsuits and SEC investigations will continue to be the responsibility of Yahoo.

"The amended terms of the agreement provide a fair and favourable outcome for shareholders," said Marni Walden, Verizon executive vice-president and president of product innovation and new businesses. "It provides protections for both sides and delivers a clear path to close the transaction in the second quarter."

The security breaches raised concerns that people might decrease their usage of Yahoo email and other digital services that Verizon is buying. A smaller audience makes Yahoo's services less valuable because it reduces the opportunities to show 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 its lax security and the lengthy delay in discovering and disclosing the hacks. The separate attacks occurred in 2013 and 2014; Yahoo disclosed them this past September and December.

Avoiding an even larger reduction in the deal value represents a small victory for Yahoo CEO Marissa Mayer, who had already been under fire on Wall Street for her inability to turn around the company and then for the humiliating security lapses that came under her watch.