Yahoo, after security lapse, saves Verizon deal with $350M discount
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.
The breaches raised concerns that people might decrease their use 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.
The lower price, now pegged at $4.48 billion, will cost Yahoo shareholders roughly 37 cents per share. But they may also be responsible for substantial legal costs.
After the Verizon deal closes, any future bills stemming from the hack will be shouldered by Altaba Inc. — a company that will become the caretaker of Yahoo’s remains, which will include about $7 billion in cash and lucrative stakes in Chinese e-commerce giant Alibaba Group and Yahoo Japan.
Altaba will be responsible for all costs stemming from shareholder lawsuits and a Securities and Exchange Commission probe into how Yahoo handled the disclosure of the massive hacks. Verizon and Altaba will split costs from all other hack-related lawsuits and government investigations.
This agreement “provides protections for both sides” and should help the deal close by the end of June, Marni Walden, Verizon’s head of product innovation and new businesses, said in a statement. Yahoo shareholders have to approve it.
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.
“Yahoo had to get this deal done. There is no better fit for them than Verizon,” said Doug Melsheimer, managing director for Bulger Partners, an investment banking firm specializing in technology.
Mayer, 41, is widely expected to step down after Verizon takes over, although she hasn’t spelled out her plans definitively. If she departs, Mayer will leave with a severance package that was valued at $44 million last summer.
The package is probably worth even more now because it primarily consists of Yahoo stock, which has risen by nearly 20 percent since last summer.
Yahoo shares rose 40 cents to close at $45.50 while Verizon’s stock added 24 cents to finish at $49.43.
Verizon’s willingness to accept some of the lingering risks from Yahoo’s security breaches underscores the wireless carrier’s desire to become a bigger player in the digital advertising market. Google and Facebook currently dominate, but Verizon believes there’s room to grow.
Because most people already have smartphones, wireless carriers such as Verizon have turned to price cuts and promotions to lure customers from each other. Under pressure, Verizon even restored unlimited data plans this month. to answer questions, solve problems and rise to solve our most urgent societal challenges together,” said Hurt, who founded Bazaarvoice in 2005 and has invested in a number of Austin startups.
“Closing this second funding round so close to our first, and with most of it still in the bank, is a validation of the opportunity in front of us and the progress we’ve made since our preview launch in July.”
The challenge data.world is tackling is the fragmentation of data. There are 18 million open data sets, but they are often stored in different places, aren’t machine-readable and take considerable time to understand and analyze.
Also at issue: There is often a duplication of efforts as different people work on the same or similar data sets but aren’t able to connect because they aren’t aware of each others’ work.
Data.world wants to solve those problems by building a platform that is part social networking site and part data aggregator. The company wants to become the central repository for open data sets, and also make it easier to find, understand and analyze the data.
The 30-person company is set up as a “public benefit corporation,” which is a specific type of corporation that allows public benefit to be a charter purpose in addition to the traditional corporate goal of maximizing profit for shareholders.
In data.world’s case, it lets the company’s board focus on its mission of making data easier to find and use, rather than putting profit or shareholder value first.
Several examples of data collaboration projects that have launched on data.world include:
■ The White House Opportunity Project, which improves data discovery and fosters collaboration with data from 11 federal agencies and 12 cities.
■ The Anti-Defamation League, which has created an open data workspace to help understand and combat the rise of hate crimes.
■ CIA Crest Archive, which has independently collected, formatted and published metadata on 930,000 newly-released declassified CIA documents, representing about 12 million pages.
“People put these data sets out there because they want people to work with them in a way that creates breakthrough innovation or change in policy or the alleviation of poverty,” Hurt said. “People are talking about everything from how to solve cancer to the intelligence of dogs by breed.”
Most users won’t pay anything to user the platform. Data.world is generating revenue by charging companies or organizations for the ability to have private accounts that allow them to keep their data secret, while letting employees access and share it.
“We already are seeing a lot of people use data.world in private,” Hurt said. “We don’t know what they’re doing, because they don’t tell us.”