Verizon wants a $1bn discount off Yahoo bid after data breach

7 Oct 2016175 Shares

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Verizon sign in New York. Image: rmnoa357/Shutterstock

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Not having your cybersecurity standards up to scratch can be a costly mistake, particularly if you’re Yahoo who will now get $1bn less from Verizon following its major data breach.

With Yahoo struggling to be the internet company it once was, it agreed a deal with communications giant Verizon to sell the company’s core search and advertising business for $4.8bn back in July.

But news of 500m Yahoo accounts being accessed in 2014 – one of the biggest hacks in history – has put Verizon’s bid in serious jeopardy.

In fact, it had been suggested towards the end of last month that the entire Verizon bid would be called off over fears that shareholders might be spooked by such a revelation.

Another blow to the company’s prospects was the news that Yahoo was actively cooperating with the US government to allow authorities scan its users’ emails using a custom software program.

But despite all this, the New York Post has reported that Verizon will still go ahead with the deal, but will ask for a hefty discount of $1bn.

A source close to the deal reported that those involved were not happy with the recent scandals and lack of disclosure, and they are now taking the opportunity to lower their initial offer.

Possible $1bn liability fund being formed

As a subsidiary of Verizon, AOL was to be coupled with its acquired Yahoo business as part of its future plans to take on the might of Google and Facebook in the lucrative but competitive world of digital advertising.

The New York Post’s source said that the CEO of AOL, Tim Armstrong, will now begin negotiating to get the $1bn discount.

“Tim was out there this week laying the law down and [Yahoo CEO Marissa Mayer] is trying to protect shareholders,” the source said. “[Armstrong] knows how to be fair, while Verizon is pushing him, he can bridge the gap.”

There are even suggestions that the large discount is being pushed so strongly because Verizon would be planning to hold $1bn in reserve, fearing any possible liabilities faced from the 2014 hack.

For the meantime however, it is understood that Yahoo are holding strong and refusing to budge on the previously agreed price, but negotiations are still ongoing.

Verizon sign in New York. Image: rmnoa357/Shutterstock

Colm Gorey is a journalist with Siliconrepublic.com

editorial@siliconrepublic.com