Verizon warns Yahoo that acquisition price could be cut over security breach

Buyer's remorse already for Verizon?

Verizon has publicly warned Yahoo that it could cut the price it is willing to pay to acquire the faded dot com, or even withdraw from the deal entirely.

It comes after the company recently admitted a 2014 security breach in which 500 million credentials were spilled, and the disclosure that the company's management had sanctioned the use of an application to enable the US National Security Agency to more easily search Ymail users' emails.

Craig Silliman, general counsel at the acquisitive US telecoms company, said yesterday that the security breaches represented material events that could justify a change in the terms of the takeover, following the auction of the company, which Verizon won with a bid of $4.8bn (£3.9bn) - compared with a peak company valuation of $125bn in January 2000.

Indeed, Silliman claimed that the onus will be on Yahoo to prove that the security breaches will have no material effect on its business. "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," he said.

While Verizon has already been briefed by Yahoo, it is still demanding "significant information" from the company before it can proceed with the acquisition. Verizon is "absolutely evaluating (the breach) and will make determinations about whether and how to move forward with the deal based on our evaluation of the materiality", Silliman told reporters.

Verizon's strategy for the Yahoo acquisition is to mash it together with the remains of AOL, which it bought for $4.4bn in May 2015, to create a web property on which it can sell advertising. The traffic regularly driven to Ymail would form a key part of that strategy, thus a migration of users to alternative platforms would damage the value of the deal to Verizon.

Some users may even opt for demonstrably more secure email alternatives.

Marissa Mayer will not join Verizon but will instead receive a severance payout valued at $57m.

Yahoo's 15 per cent stake in Chinese dot com Alibaba and its 36 per cent stake in Yahoo Japan, worth an estimated $32bn and $8bn respectively, are not included in the Verizon sale. When complete, Yahoo would change its name and become a publicly traded investment company.