Yahoo Hack Giving Verizon Cold Feet

Yahoo’s recent news of a 2014 hacking and accusations that the company should have reported the event sooner are affecting Verizon’s agreement to buy Yahoo, to the tune of $1 billion. According to the New York Post, Verizon wants to pay $3.8 billion instead of the original $4.8 billion.

Yahoo was hacked in 2014, and 500 million user accounts were compromised, but the company delayed disclosure of the hack until recently. News that came out this week reported that a secret Foreign Intelligence Surveillance Court has ordered Yahoo to scan emails for terrorist signatures, the first time this has been done. Tim Armstrong, CEO and Chairman of AOL, is not impressed with Yahoo’s disclosure, or lack of it, and might be reconsidering his decision to buy Yahoo. According to a source close to Verizon, “In the last day, we’ve heard that Tim [Armstong] is getting cold feet. He’s pretty upset about the lack of disclosure, and he’s saying can we get out of this or can we reduce the price?”

Verizon originally planned to scale its AOL group with the addition of Yahoo to compete with Google and Facebook for digital ads. If the deal is closed in the first quarter, AOL with Yahoo will have 1 billion customers and should reach 2 billion by 2020.

In recent days, Armstrong has met with Yahoo executives to discuss a price reduction, but Yahoo is resisting by claiming that Verizon has no legal recourse to change the agreement.

AOL was acquired by Verizon 16 months ago at a price of $4.4 billion and is still integrating with the telecom company. Armstrong’s request for a $1 billion discount is, one person told The Post, on top of a $1 billion reserve that Verizon may set aside to cover costs associated with the Yahoo email hack.

Yahoo and Verizon are not commenting. On Thursday [October 6], Verizon shares were unchanged while Yahoo shares closed 3 cents down.