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Why Did Yahoo! Lose about $300 Million in Its Verizon Deal?

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Revised deal between Yahoo! and Verizon 

According to a February 15, 2017, report from the Wall Street Journal, Verizon (VZ) is close to a revised deal to buy Yahoo’s core Internet business for about $300 million less than the original price of $4.8 billion. Additionally, the deal would require Verizon and Yahoo! to share any future liability from potential lawsuits related to the two massive data breaches.

In July 2016, Verizon agreed to acquire Yahoo! for $4.8 billion in cash. However, that deal has been in limbo since Yahoo! revealed it had suffered two major data breaches that impacted more than 1 billion users.

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Verizon’s revenues in 4Q16

Verizon generated revenues of $32.3 billion in 4Q16, a 5.6% reduction year-over-year (or YoY). The main reason for this decline was primarily due to the divestiture of its wireline assets to Frontier Communications (FTR) in April 2016, as well as lower-than-expected wireless gross subscriber additions due to intense competition.

Verizon believes that the acquisition of Yahoo! and its purchase of AOL could 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).

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