Verizon Looks To Vanquish Yahoo Deal Following Disclosure Of Government Spy Program And Account Hacking

Yahoo can't seem to catch a break these days. At least one research firm predicts the company will report a double-digit decline in ad revenue when it reports earnings with the Securities and Exchange Commission. Coupled with the negative attention Yahoo has received over a massive security breach and the revelation that it built a sophisticated email scanner for the U.S. government to spy on its users, there's increasing chatter than the Verizon deal might be off.

Verizon agreed to purchase Yahoo for $4.8 billion last July, but in the time that's passed since then and now, Yahoo's taken a beating in the press, all self-inflicted. More recently, it was reported that Verizon might be seeking a $1 billion discount if it's to proceed with the takeover. That discount took into consideration Yahoo's mishandling of a security breach that compromised around 500 million user accounts (a former Yahoo executive said it could be as high as 1 billion user accounts), but with Yahoo admitting to monitoring emails for the government and now potentially reporting a big drop in revenue, it might be too much for the wireless carrier to stomach.


While the two sides already agreed on terms of the deal, there's a clause that could allow Verizon to back out. The clause allows for such a move if something happens that could "reasonably be expected to have a material adverse effect on the business, assets, properties, results of operation or financial condition of the business," according to Reuters.

"I think we have a reasonable basis to believe right now that the impact is material and we’re looking to Yahoo to demonstrate to us the full impact. If they believe that it’s not, then they’ll need to show us that," Verizon's general counsel stated to reporters last week.

A bad quarter with big dips in revenue could support Verizon's claim and perhaps make it easier to back out of the deal, if in fact it decides to go that route. Alternately, Yahoo could renegotiate a lower price to avoid potentially losing Verizon as a buyer altogether.