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Yahoo Now Expects Verizon Deal to Close in Q2

Variety logo Variety 1/23/2017 Todd Spangler
© Provided by Variety

Yahoo expects the sale of its core internet business to Verizon to be completed in the second quarter of 2017, the company said in releasing its Q4 results Monday.

But the two massive hacks that Yahoo disclosed — after inking the deal with Verizon last summer — have raised uncertainty about how or even whether the telco will proceed with its planned $4.8 billion takeover of the Yahoo properties. Verizon may decide to terminate the agreement or seek to lower the price tag.

“Yahoo has continued to work with Verizon on integration planning for the sale of its core business,” Yahoo said in its Q4 2016 earnings announcement. “In terms of timing, Yahoo had previously stated that it expected to close the transaction in Q1. However, given work required to meet closing conditions, the transaction is now expected to close in Q2 of 2017. The company is working expeditiously to close the transaction as soon as practicable in Q2.”

Yahoo is not holding a call with analysts to discuss earnings, citing the pending Verizon takeover of its operating businesses.

As for Yahoo’s Q4 financial results, it beat Wall Street expectations with total revenue of $1.47 billion and adjusted earnings per share of 25 cents. Analysts had expected sales of $1.38 billion and adjusted EPS of 21 cents. Revenue excluding traffic-acquisition costs declined 4%, to $960 million. Adjusted earnings before interest, taxes, amortization increased 51%, to $324 million, compared with the year prior.

In September, Yahoo announced that information on at least 500 million email accounts was stolen by “state-sponsored” hackers in 2014. That was the biggest known data breach on record until last month — when the company disclosed that data from more than 1 billion user accounts was stolen by an unknown party in 2013.

Verizon has said it is monitoring Yahoo’s ongoing investigation into the security breaches, and that the telco will review the findings before deciding on next steps. Verizon is scheduled to report fourth-quarter 2016 earnings on Tuesday, Jan. 24, before the market opens.

Yahoo CEO Marissa Mayer, in a prepared statement accompanying the Q4 results, said the company’s “top priority continues to be enhancing security for our users” in addition to integration planning with Verizon. According to Mayer, about 90% of Yahoo’s daily active users have already taken — or don’t need to take — remedial action to protect their accounts in the wake of the hacks.

On Sunday, the Wall Street Journal noted that the SEC is investigating the security breaches, with the agency looking into whether Yahoo should have disclosed the incidents to investors sooner. In November, Yahoo disclosed in a filing that it was cooperating with several agencies that requested details on the 2014 breach, including the SEC, as well as the Federal Trade Commission, the U.S. Attorney for the Southern District of New York and several state attorneys general.

Assuming the Verizon deal is consummated, Yahoo plans to rename itself “Altaba Inc.,” as it will become primarily an investment holding company whose major asset will be shares of China’s Alibaba Group. At the same time, Mayer will resign from the company’s board along with six other members including former chairman Maynard Webb. With the planned changes, Yahoo appointed ex-Broadcom CFO Eric Brandt (who joined the board in March 2016) chairman effective Jan. 9.

Mayer is expected to join Verizon, if and when the deal closes, at least for an interim transition period. Yahoo and AOL operations are to be merged, with AOL CEO Tim Armstrong assuming oversight of the combined group. Armstrong said in an interview earlier this month that Mayer is “in a mode where she wants to see them through to the next iteration. Then depending on what the next phase is, we’ll make a decision (about her future role).”

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