Verizon may back out of Yahoo deal due to email snooping

Yahoo’s data breach and reports of email spying may cause Verizon to enact a clause in the contract between the companies that lets it cancel the deal

Verizon may back out of Yahoo deal due to email snooping

The deal for Verizon to purchase struggling Yahoo became endangered thanks to reports of Yahoo spying on user email for the U.S. government, not to mention the lost data on 500 million accounts and a decline in revenue.

Earlier this month, Verizon publicly declared it was looking for a $1 billion discount on the original $4.8 billion it offered to purchase Yahoo. Verizon sought the discount because of Yahoo’s enormous data breach and because of reports that Yahoo was under a court order to scan emails for terrorist chatter, according to the New York Post. 

Now it looks as though Verizon might be trying to back out of the deal completely. Reuters reports that the contract between the two companies has a clause in it that allows Verizon to cancel the deal if a new factor "reasonably can be expected to have a material adverse effect on the business, assets, properties, results of operation or financial condition of the business." 

This came from Verizon's general counsel Craig Silliman, who told reporters at a roundtable in Washington the data breach could trigger the clause. 

The Federal Trade Commission has approved the proposed acquisition, but it still needs approval from the U.S. Securities and Exchange Commission and the European Commission. 

There had also been concerns that Yahoo was going to have a very bad quarter, but that was shot down with better-than-expected revenue and earnings. The research firm eMarketer had predicted a double-digit decline in ad revenue, and last week CEO Marissa Mayer canceled the earnings call with analysts, citing "the pending transaction with Verizon." 

The company announced third-quarter earnings per share of 20 cents, adjusted, on revenue of $1.31 billion. Analysts polled by Thomson Reuters expected Yahoo to report earnings of about 14 cents a share on $1.31 billion in revenue. That may have saved the deal—at least for now.

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