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Verizon scrapes $350 million off deal to buy Yahoo After disclosures about massive security breach

Updated: Feb 4, 2019

Verizon is getting a discount for damaged goods.

The telecommunications giant and internet pioneer Yahoo have signed an agreement that drops the original $4.83 billion acquisition price for Yahoo by $350 million, the companies said Tuesday. This comes months after Yahoo's public image tumbled downhill with one hacking scandal after another.

In the seven months since Verizon announced it would buy Yahoo's operating business, Yahoo has revealed that it suffered the worst hack in history -- twice. Yahoo first set the record in September with 500 million accounts breached. It then broke its own record in December with the revelation that 1 billion accounts were hacked in a separate breach. The company has also faced backlash for reportedly building tools that help the government spy on citizen emails.

The $4.83 billion deal had been on shaky ground since the massive breaches, but Verizon apparently has not lost faith in Yahoo's 1 billion monthly active users.

"We have always believed this acquisition makes strategic sense. We look forward to moving ahead expeditiously so that we can quickly welcome Yahoo's tremendous talent and assets into our expanding portfolio in the digital advertising space," Marni Walden, Verizon's executive vice president, said in a statement.

As part of the price drop, Verizon and Yahoo have agreed to share the legal and regulatory burdens that will come from the hacks the website suffered in 2013 and 2014. Yahoo is reportedly under investigation by the US Securities and Exchange Commission for potentially taking too long to inform investors about the breaches.

Under the terms of the revised deal, Yahoo will pay half the bill for any non-SEC government investigations and lawsuits related to the hack. Any shareholder lawsuits over the hacks will be Yahoo's responsibility.

The acquisition is part of Verizon's strategy to boost its digital advertising arsenal as it gears up to compete with Google and Facebook. Yahoo's popular assets such as fantasy sports and Yahoo Mail still make money, and Verizon is looking to combine Yahoo with AOL, which Verizon bought for $4.4 billion in 2015. Verizon's push to purchase Yahoo's operating business was delayed after the breach revelations but apparently is moving along again.

"It is an important step to unlock shareholder value for Yahoo, and we can now move forward with confidence and certainty," Yahoo CEO Marissa Mayer said in a statement.

The price discount is just the latest setback in what's been a long struggle for Yahoo. When Mayer joined in 2012, she was seen as a potential savior for the beleaguered company. A former Google executive, she helped bring the company into the mobile era by refreshing all of Yahoo's services for phones and tablets. But Mayer, 41, never figured out how to make much money off the company's properties.

The deal is still open to adjustments, the companies said. It's expected to close during the second quarter.

After that, what's left of Yahoo will basically be an investment company, with a lucrative stake in the Chinese ecommerce giant Alibaba worth more than $30 billion. Last month, Yahoo said it will name the leftover part of the company Altaba, and reduce the number of members on its board. Mayer and Yahoo co-founder David Filo are among those leaving the board.

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