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Verizon said to explore lower price or exit from Yahoo deal

Verizon is exploring changing either a price cut or outright termination of its pending acquisition of Yahoo Inc. in the wake of a second major report of an e-mail hack at Yahoo.Elise Amendola/Associated Press/File 2016

Verizon Communications Inc. is exploring a price cut or possible exit from its $4.83 billion pending acquisition of Yahoo Inc., after the company reported a second major e-mail hack affecting as many as 1 billion user accounts, according to a person familiar with the matter.

While a Verizon group led by AOL chief executive Tim Armstrong is still focused on integration planning to get Yahoo up and running, another team, walled off from the rest, is reviewing the breach disclosures and the company’s options, said the person, who asked not to be identified discussing private information.

A legal team led by Verizon general counsel Craig Silliman is assessing the damage from the breaches and is working toward either killing the deal or renegotiating the Yahoo purchase at a lower price, the person said. One of the major objectives for Verizon is negotiating a separation from any future legal fallout from the breaches. Verizon is seeking to have Yahoo assume any lasting responsibility for the hack damage, the person said.

Yahoo shares fell 6.1 percent to $38.41. Verizon rose .35 percent to $51.81.


User data from more than 1 billion accounts was stolen in August 2013, according to a Yahoo statement Wednesday, the second major breach the company has disclosed in the past three months. Given the severity of the hack, which included more than 150,000 US government employees, Verizon is under pressure to reassess the value of the deal and appease shareholders who may see Yahoo as damaged goods.

‘‘As we’ve said all along, we will evaluate the situation as Yahoo continues its investigation,’’ Verizon said Wednesday in an e-mailed statement. ‘‘We will review the impact of this new development before reaching any final conclusions.’’

In October, with slow progress and limited information available from the investigation, Silliman put Yahoo on notice, saying it was reasonable to assume the breach has had a material impact on the deal.


In the 2013 hack disclosed Wednesday, Yahoo said compromised user account information may have included names, e-mail addresses, telephone numbers, dates of birth, passwords, and, in some cases, encrypted or unencrypted security questions and answers. The company said it was notifying potentially affected users and had taken steps to secure their accounts.

Verizon has said that the deal, which is expected to close in the first quarter of 2017, still makes sense strategically. The company is hoping to expand beyond its wireless phone service by building a mobile media and advertising business and wants to work the billion or more Yahoo users into the fold.

For Yahoo chief executive Marissa Mayer, the new hacks could weaken Yahoo’s reputation with users who have been using its services for years and further tarnish its credibility ahead of the Verizon deal.

‘‘We are confident in Yahoo’s value and we continue to work towards integration with Verizon,’’ Yahoo said in a statement.

Hours after the disclosure Wednesday, a Yahoo user filed a class-action lawsuit against the Sunnyvale, Calif.-based company.

“Yahoo failed, and continues to fail, to provide adequate protection of its users’ personal and confidential information,’’ New York consumer Amy Vail said in the lawsuit. ‘‘Yahoo users’ personal and private information has been repeatedly compromised and remains vulnerable.’’

The FBI is probing the Yahoo hack, Josh Earnest, White House spokesman said Thursday. He noted the FBI had said it was looking into the previous breach as well.


Also, New York Attorney General Eric Schneiderman said his office is in touch with Yahoo and ‘‘is currently examining the circumstances of the breach’’ and the company’s disclosure of the hack to law enforcement.