Verizon Seeks a $1 Billion Discount on Yahoo Acquisition Following Scandalous Revelations

2016 has been a tumultuous year for Yahoo, a former titan on the internet frontier. Early in the year, the organization that was once valued at an impressive $128 billion consented to a significant markdown, deciding to be acquired by telecommunications behemoth, Verizon, for only $4.8 billion. However, even this deep-discount deal is in potential jeopardy following a series of scandalous revelations from the beleaguered company.

Last week, we learned that Yahoo had constructed unique software that was used to assist government agencies in surveilling its email service users. The company’s explanation of this act has been vague and unconvincing, merely stating that the public has misunderstood its actions. However, they provided no further insight or assurances to help us understand.

In addition to this worrisome news, Yahoo has also come clean about a significant data breach. The company has revealed that as many as 500 million user accounts may have been compromised. They suspect that the hack was a state-sponsored breach, implying that a formidable cyber foe such as China or Russia could potentially be behind the violation. At this point, no specific accusations have been formally levied against any particular government.

This tumultuous chain of events bears possible huge consequences for Yahoo, and especially, the Verizon deal. One of the speculated outcomes was the potential that the Verizon sale might be derailed, or worse yet, terminated. In fact, it seems we are already seeing precursors indicating that Yahoo may end up selling for even less than the already significantly slashed price of $4.8 billion.

Infamous for their frugality, Verizon is now pushing for a $1 billion discount on the deal. If approved, this would value Yahoo at a mere $3.8 billion – a less than ideal scenario for the once thriving brand. The New York Post reports that Tim Armstrong, AOL’s CEO, a company also acquired by Verizon, is leading the charge for this aggressive discount. Armstrong, it seems, fears that Yahoo’s value has been significantly tarnished in the light of these revelations, and that Verizon’s plans to attract 2 billion consumers on the AOL/Yahoo platform by 2020 might face serious roadblocks. Currently, Yahoo services are utilized by an estimated 1 billion users.

Adding to the volatility of the situation, Verizon was reportedly given a sparse two days’ notice before the public was informed about the massive data breach that took place back in 2014.

Yahoo has been facing issues not just on this front, as recently, a second individual filed a lawsuit against the company, alleging gender bias in Yahoo’s hiring practices. Scott Ard, who was an employee at Yahoo for more than three years until his departure in early 2015, claims men were unjustly terminated at Yahoo to “accommodate management’s subjective biases and personal opinions”, according to a lawsuit filed in San Jose, California.

In response, Yahoo spokeswoman Carolyn Clark stated they do not comment on matters that are currently in court.

In retrospect, these revelations may cause Verizon to reflect upon whether their potential investment, even at the discounted price, is worth the $4.8 billion.

In the midst of this chaos, one can only watch and wait to see what will unfold next for Yahoo.

Image: CNN Money