Will Verizon complete the deal with Yahoo?
Various reports in the media have now indicated that Verizon is demanding a massive discount of $1 billion from Yahoo after it was revealed that the company had some privacy concerns.
To say that this discounted offer from Verizon comes at a bad time for Yahoo would be an understatement. Yahoo has struggled to recover from recent problems such as the revelation that more than 500 million Yahoo accounts had been in 2014 and the company didn’t even know about it until a few months ago.
Yahoo is still in the middle of completing its sale to Verizon and the recent disclosures about hacked accounts along with spying activities seem to be costing the company in more ways than one.
In a recent report published by the New York Post it was alleged that Verizon was now demanding Yahoo for a substantial discount for the acquisitions of Yahoo’s online services.
It was revealed that the discount amount asked is in the region of a billion dollars and Verizon will deduct this amount from the initial $4.8 billion deal before the sale is finalized.
Frank Aquila, a reputed M&A lawyer and also a partner at Sullivan & Cromwell told TechCrunch in an interview that the key would be what was actually disclosed by Yahoo before signing the deal and that no one should be surprised that Verizon wanted a significant reduction in the initial amount that was agreed for the sale between Verizon and Yahoo.
It was only a month ago when Yahoo announced that the company had gone through a data breach attack that had affected at least 500 million Yahoo user accounts.
Experts feared that Yahoo’s deal with Verizon could get affected by recent revelations.
Yahoo also revealed that a vast amount of information regarding names, email addresses, encrypted passwords (which are generally considered to be very safe) along with birthdates and encrypted and decrypted answers to users security questions were compromised in the data breach that happened because of a hack attack.
Yahoo, to defend its reputation, blamed the attack on a state-sponsored actor but some industry experts think that Yahoo was simply trying to hide the fact that such a large amount of information was stolen from its systems without the company having a clue about it.
Readers should know that though encrypted passwords are generally safe, but when any hacker gains access to additional sensitive information such as birthdates and email addresses along with names then it becomes easier to break those as well.
Additionally, hackers can easily use the information stolen from one website on another site which leads to massive identity theft schemes.
As indicated earlier, the primary reason why Yahoo has not been able to get the data breach monkey off its back is that it took Yahoo more than two years to confirm that it had suffered from a breach and some quarters of the media questioned if Yahoo purposefully did not reveal the data breach.
In other words, the data breach took place in 2014 but Yahoo did not discover the intrusion until a few month ago.
And because Yahoo chose to reveal the data breach information at such a sensitive time, it could easily impact the deal with Verizon in a negative manner.
Marissa Mayer, former Google employee and the current CEO of Yahoo, reportedly did not learn about the data breach incident until July of this year.
Coincidently, this was also the same time period when Yahoo representatives were negotiating a sale deal with Verizon.
Back in August, in an interview given to TechCrunch, Yahoo told the popular technology news site in an official statement that the company was acquainted with the rumors which said that the internet giant had been a target of hackers.
Last month,over 500 million user accounts at Yahoo “were hacked.”
Yahoo also told TechCrunch that the company was looking into the situation with an investigation that was being carried out by an internal security team.
However, back in September (last month) Yahoo made a proxy statement (A proxy statement is a statement required of a firm when soliciting shareholder votes) which was required as part of the Verizon sale and claimed that Yahoo investigative teams had found out that there were no third-party allegations of any data breach.
Recently Mark Warner, an American politician and the senior United States Senator from Virginia, and has been in office since 2009, suggested that the Security and Exchange Commission should investigate Yahoo and Yahoo representatives about the measures Yahoo had taken with regards to cyber security.
Warner spoke about the issue in a recent statement and said that Yahoo’s September filling asserting lack of knowledge of security incidents involving its IT systems created some serious concerns about the truthfulness in representations to the public.
And if you thought that this was the end of Yahoo’s tribulations than you thought wrong since Yahoo’s cyber troubles go much deeper than just 500 million hacked email accounts.
Various media reports that were published last week asserted that Yahoo had browsed through (some reports used the term scanned) all of the company’s users’ emails in 2015 while it was trying to comply with the requirements put forward by a United States intelligence agency.
Verizon is demanding a hefty price cut in the Yahoo deal.
And expectedly Yahoo’s CEO, Marissa Mayer, had to take the blame for the incident in order to keep the sale deal with Verizon from falling through.
It was reported that Marissa Mayer was responsible for Yahoo’s decision to not act against the intelligence agency’s demands by going to the court of law. Allegedly, Mayer ordered the team that handled the company’s mail services to build a custom mail-scanning application that would finish the job without apprising Yahoo’s own engineers who worked on the company’s security issues.
As was indicated earlier, the surveillance procedures were not disclosed in Yahoo’s transparency report that is released on a bi-annual basis.
The biannual transparency report is supposed to document government requests for any data that is related to the company’s users.
More interestingly, Yahoo termed the reports that talked about the mail-scanning application as misleading but did not deny that an operation of this nature ever occurred at the behest of US intelligence services.
Readers should know that public investors by law have a right to be informed about any and every significant event that can affect the future of the company. Some industry experts agree that the data security breach incident should be counted as one of those significant events that could impact the future of Yahoo.
On the other hand, Verizon in its own right could easily make the claim that incidences like data breaches and millions of hacked accounts could devalue Yahoo as a company and as a brand and thus could depreciate the company’s stock.
Verizon is now looking to push Yahoo to accept the $1 billion discount.
Tim Armstrong, CEO and chairman of AOL since 2009, was quizzed about the hacks by CNBC reporters in a recent televised interview which took place last week in which Armstrong said that the data breach thing was something new that got introduced in the equation and that AOL would work through these problems together with Yahoo.
He further added that he intended to be protective of Verizon and the company’s shareholders.
As has become the norm in most acquisitions, the media had been abuzz with rumors about a possible sale deal involving Yahoo and Verizon and the rumors were finally confirmed to be true when the deal was finally published in July of this year.
We’ve been told that deals like the one between Verizon and Yahoo generally consume several months to get anywhere near to a close.
It should also be pointed out that Verizon also acquired AOL in 2015 for a reported figure of $4.4 billion.
Which Other Company Is Planning For An IPO?
It has been reported that Snap is also engaged in preparations for offering an IPO that could value the company at $25 billion if not higher.
In a recent article published by the Wall Street Journal it was reported that Snap, the present parent company of Snapchat, was actually busy in planning an initial public offering as ear as March.
Furthermore, reports have suggested that by offering the initial public offering in March, Snap could value the company upwards of $25 billion.
Back in May of this year, Snap was able to raise a total of $1.8 billion in a fairly generous round of financing. Moreover, now, the American privately owned multinational camera company based in Venice, California, has around 150 million users who are active on the site on a daily basis.
In a series of leaked documents, TechCrunch reported that the company’s projections showed that Snap Inc could possibly generate upwards of $1 billion revenue as early as 2017.
According to the same leaked documents as reported by TechCrunch, the people at Snap Inc. have roughly calculated that the company was in a reasonable position to generate between $250 million and $350 million for the current year, 2016.
Snapchat is looking to attract more investors. Quickly.
To some readers that may sound like a lot of money for a single year and it is somewhat a satisfactory amount of money for a technology company but the fact remains that in the technology business there is always a need for more money in order to expand operations and maintenance functions.
Some industry insiders believe that Snap Inc. has a suitable opportunity to use the ton of money it was able to raise last year and as well as this year to continue its streak of creating new products.
Snap Inc did introduce a new hardware product called Spectacles glasses which was initially thought to have a decent shot at becoming a successful product.
To Snap Inc’s credit, the Spectacles glasses were priced reasonably low but things turned around quickly, for the worse, when an increasing number of industry experts started to consider it as a product that Snap Inc would have to sell at a loss in order to attract more customers. In other words, a loss leader.
The Spectacles glasses is still trying to encourage more adoption across a broader demographic.
Nevertheless, Snap Inc. could also use the extra cash for more acquisitions . Snapchat bought Bitstrips, the makers of Bitmoji, for a reported sum “in the ballpark” of around $100 million.
Just for clarity’s sake, the company’s own evaluation of an $25 billion or more IPO cannot be taken as granted.
The future essentially represents a rather wide range and then there is the problem of those details that usually do not get finalized until the bankers involved in the process start to piece out the company’s initial public offering.
But there are factors are going well for Snapchat as a company. Snapchat was consistently shown some incredible figures in terms of growth in the number of active users and revenue generation.
Both of these factors should help Snapchat engage more marketers. Some industry insiders are of the opinion that Snapchat is well on its way to generate a tremendous amount of interest from the likes of Wall Street and co.
Right now, Snapchat could consider Facebook’s advertising business as a legitimate competitor to its own but Facebook is chugging away nicely even after a failed attempt to buy Snapchat.
In fact, after Facebook’s failed bid to acquire Snapchat, the company threw an appreciable amount of resources and manpower to copy and beat Snapchat features.
Fast forward to today and we know that other technology companies have also started to take and develop ideas from Snapchat.
Recently Instagram proclaimed that the company’s Stories feature was able to lure 100 million daily active users. Add to that the fact that Kevin Systrom, Instagram’s CEO, actually did not hide the fact that Instagram Stories was actually a clone of one of Snapchat’s features.
To put it another way, there is little doubt in the fact that the two companies will be competing with each other for more market share in the foreseeable future.
Moreover, Snapchat has done enough to give the likes of Wall Street solid indicators that the company is well on its way to grow past its last $20 billion valuation.
Needless to say, the time is ripe for Snap Inc to step it up and gather more interest from Wall street that will see the company offer one of the largest IPOs in recent memory.
TechCrunch reached out to a Snapchat representative to ask about the IPO issue and the Snapchat fellow responded by saying that the company wasn’t making remarks about rumors or speculation that surrounded its financing strategy.
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