Following a recently discovered security breach (from 2013) Yahoo! Inc. Stock not found YHOO moved to force some of its users to reset their passwords. This is something the company did not do following its September disclosure of another breach. And it complicates an already sticky situation.
The fact Yahoo wants users to reset passwords could throw a monkey wrench into the company’s planned sale of its core assets for $4.83 billion to Verizon Communications Inc. (NYSE:VZC), according to security experts.
The 2013 Breach Problem
The main problem with the recently discovered (2013) hack and the reason Yahoo! wants some user to reset their passwords is that some of the information taken, including security questions and answers was not encrypted.
This information, such as the maiden name of a user’s mother, never changes. Hackers could potentially use the information to gain access to other accounts unrelated to Yahoo! Moreover, the number of people affected isn’t clear. Some people may have had more than one account and some users may have accounts they haven’t used.
Verizon could try to cancel the deal or ask for a reduced price, depending on any damage to Yahoo! caused by a drop in users or engagement with its websites and services. The original plan was for Verizon to close the deal in the middle of the first quarter. Now this is more likely to be pushed back to the end of Q1.
Verizon and Yahoo! had already been working on an agreement to share the cost of future liabilities resulting from the 2014 hack announced in September but the disclosure of the larger 2013 breach effectively resets negotiations. Still, this remains the most likely option.
Verizon Wants A Better Deal
Most experts expect Verizon to ask for a reworking of the deal – not an outright cancellation. Canceling the agreement would be difficult at best, especially since there is no proof to date that the breach has lowered the value of the Yahoo! assets.
Asking for a better price than $4.83 billion does make some sense, although Yahoo! has not conceded any damage at all. Asked about the status, a Yahoo! spokesperson said, “We are confident in Yahoo‘s value and we continue to work toward integration with Verizon.”
Others Will Be Interested
Further complicating the situation is the fact that if Verizon does manage to get out of the deal, others will be interested. That’s because it is difficult to build a digital advertising business from scratch. This is, after all, one of the main reasons for Verizon’s interest in the first place.
Forrester analyst, Jeff Pollard told CNBC that the most likely buyer – should Verizon back out – would be a private equity firm. The intent, he said, would be to sell the assets a few years down the road. Pollard added, "I don't think anyone wants to make an acquisition with brand loyalty and legal liability issues."