Yahoo Hacking Breaches Probably Won’t Kill Verizon Deal


Since news of a second hacking breach at Yahoo surfaced last week, there have been some calls for Verizon (NYSE: VZ) to drop its $4.8 billion dollar bid for Yahoo’s core services. It probably won’t, though. And it shouldn’t.

Naysayers insist that the breaches have not only cost Yahoo subscribers, significantly lowering its value, but the possibility of further breaches is just lying in wait like a ticking time bomb. Those people are correct on both points. However, they are also being shortsighted.

These facts should be used as leverage to drive down the deal’s price to bargain level, not destroy it completely.

Here’s why.

Yahoo Negligence

It’s common knowledge now that the Yahoo became the victim of the two biggest known hacking breaches in corporate history because it skimped on security. The company completely ignored the warnings of its own security chiefs about the dangers due to aging infrastructure.

But that is fixable, it only takes smart people and a lot of money. Yahoo should have to take a hit on the sales price so that Verizon can make the upgrades. After all, these breaches were not known when the deal was made.

Yahoo Core Services Can Be a Cash Cow for Verizon

Verizon wants Yahoo for very good reasons, and those reasons still stand. They all generally fall into two categories:

  • Advertising – While it’s true that Yahoo’s advertising numbers aren’t all that beautiful to behold, that is only another reason to try and drive down the price. Just because Yahoo couldn’t develop that platform to its fullest potential, doesn’t mean that Verizon can’t. People disparaged the AOL deal, too, but it’s doing great with ads and…
  • Video – Everybody is making bank on video these days, and Verizon is right on top of the trend, offering live streaming football. Yahoo expands that capability exponentially.

Nothing could have been better for Verizon than news of those breaches. They will save the company hundreds of millions of dollars on the price of a new cash cow.