Verizon reportedly wants $1B off Yahoo price after scandals

Yahoo first revealed a major data breach, and is accused of letting the gov't search user e-mail

Financial trends and news by Steven Loeb
October 7, 2016
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Yahoo has been having a bad couple of weeks, first revealing that 500 million of its user's accounts had been exposed to hackers, followed by reports that it let the government have access to user emails. If you thought there would no consequences for that kind of press, you were sadly mistaken,

Verizon, which bought Yahoo's assets, including Yahoo Mail, Flurry and Gemini, for $4.83 billion in cash in July, wants a big discount, according to a report from the New York Post, citing anonymous sources. The company is looking to lower the price by as much as $1 billion, or nearly 21 percent of what it paid for Yahoo's assets.

The one driving that decision is Tim Armstrong, CEO of AOL, which was bought by Verizon for $4.4 billion last year. When Yahoo becomes part of Yahoo, the plan is to integrate it with AOL, to create a competitive digital ad unit.

Armstrong is said to be "getting cold feet," and sources told the post that he's "upset about the lack of disclosure" regarding these issues with Yahoo. 

VatorNews has out to Verizon and Yahoo for confirmation of this report, but neither company would comment. 

Yahoo's data breach

Two weeks ago, Yahoo revealed that it had been hacked back in 2014, in an incident that affected "at least 500 million user accounts." 

The information that was stolen included names, email addresses, telephone numbers, dates of birth, hashed passwords (the vast majority with bcrypt) and, in some cases, encrypted or unencrypted security questions and answers.

What wasn't stolen, at least there's no evidence yet to suggest that it was, includes unprotected passwords, payment card data, or bank account information. The system that has card data and bank account information was, thankfully, not among those hit. So at least there's that. 

There is currently an ongoing investigation into the matter, and Yahoo says it is working closely with law enforcement. Whoever was hacking the system is no longer there, which may suggest that, whoever it was, they got everything they wanted and left. 

Yahoo also notified users, and is encouraged them to change their passwords. 

A Verizon spokesperson told VatorNews at the time that the company learned about the breach "within the last two days."

Yahoo's government deal

The second scandal is a little more murky than the data breach, only because Yahoo is being vague about what exactly it did or didn't do.

This week, a report out from Reuters stated that Yahoo had allowed the government to look for "specific information," and "a set of characters," in hundreds of millions of its user's incoming emails. 

Yahoo was also accused of building a custom software program specifically to help the NSA comb through those messages. 

According to what surveillance experts told Reuters, this is actually the first time that an Internet company, based in the United States, agreed to let the government search all of its user's arriving messages. In previous cases, where permission was granted, the messages were either old, and had been stored, or the government was given access to a small number in real time. Never before have they had access to all messages, as they were coming in. 

The company released two statements on the matter.

Yahoo is a law abiding company, and complies with the laws of the United States," was its first response, but a day later it came out with this:

The article is misleading. We narrowly interpret every government request for user data to minimize disclosure. The mail scanning described in the article does not exist on our systems."

That could mean that the mail scanning did exist in the past, though. 

While Verizon seemingly wanted Yahoo more for its ad network and video capabilities than it's e-mail, these scandals will no doubt hurt the company's image going forward. Whether or not that's worth $1 billion remains to be seen.

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