Reviewing the Yahoo! deal
On July 25, 2016, Verizon Communications (VZ) agreed to acquire Yahoo! for $4.8 billion. However, in early August 2016, more than 200.0 million Yahoo! accounts were hacked, and the information was put up for sale on the Deep Web. On September 22, 2016, Yahoo! announced the results of its investigation, concluding that there had been a breach of its system, which affected 500.0 million user accounts.
During Verizon’s 4Q16 earnings conference call, management told investors that the company is still evaluating the impact of the Yahoo! breach and hasn’t reached any final conclusions. If Verizon determines the impact of the breach is material, the carrier could press for renegotiation of the buyout terms.
Verizon’s revenue in 4Q16
Verizon generated revenue of $32.3 billion in 4Q16, a 5.6% fall YoY (year-over-year). The main reason for the fall was primarily due to the divestiture of wireline assets to Frontier (FTR) in April 2016 and lower-than-expected wireless gross subscriber additions due to intense competition.
Verizon believes that the acquisition of Yahoo! and the purchase of AOL will also contribute to its revenue growth going forward. Verizon sees the Yahoo! acquisition as part of the campaign to strengthen its position in the digital media and advertising sector. Perhaps the carrier, which is now facing growing competition in its traditional wireless business, is hoping to become a significant digital advertising player along with industry giants Facebook (FB) and Alphabet (GOOGL).