Yahoo Says Sale to Verizon Delayed Until Second Quarterby
Company says more time needed to meet ‘closing conditions’
Web portal reports revenue, profit that top analysts estimates
Yahoo! Inc. said the sale of its main web operations to Verizon Communications Inc. has been delayed until next quarter to meet closing conditions while the company recovers from the disclosure of massive hacks to its user accounts.
The company said late Monday it’s “working expeditiously” to finish the deal as soon as practical. Yahoo had expected the agreement to be completed in the current period. The web portal also reported fourth-quarter revenue that topped analysts’ estimates and user activity that showed minimal declines after the announcement last month of a second major security breach.
Chief Executive Officer Marissa Mayer is under pressure to conclude the deal with the telecommunications giant following the revelation of massive hacks, most recently in December when Yahoo said as many as 1 billion user accounts may have been compromised. Verizon is exploring a price cut or possible exit from the pending acquisition that was valued at $4.83 billion when it was announced in July, a person familiar with the matter said in December.
"We continue to believe Yahoo remains attractive to Verizon," Kunal Madhukar, an analyst with SunTrust Robinson Humphrey, said in a note Tuesday. If user engagement has indeed remained consistent through the hacks, "Verizon may not consider the impact to be material."
Verizon declined to comment on the new time frame for the deal.
“Yahoo has been an interesting process,” said Verizon Chief Financial Officer Matt Ellis in an interview Tuesday. “There’s been good progress, but we are still awaiting the final reports and therefore we haven’t reached any conclusions yet."
Shares of Yahoo rose 3.1 percent to $43.71 at 11:20 a.m. in New York. Much of Yahoo’s value is tied to its stake with Alibaba Group Holding Ltd., which was up 2.4 percent following earnings on Tuesday. The stake is not part of the Verizon deal.
Yahoo reported sales, excluding revenue passed on to partners for web traffic, of $960 million, topping analysts’ estimates of $907.9 million, according to data compiled Bloomberg. Profit, before certain items, was 25 cents a share. Analysts projected 21 cents.
“With our 2016 and Q4 financial results ahead of plan, and the continued stability in our user engagement trends, the opportunities ahead with Verizon look bright,” Mayer said in a statement. “In addition to integration planning, our top priority continues to be enhancing security for our users.”
Yahoo also released data showing e-mail activity with the usual seasonal declines after the company announced the security breach in December. The e-mail activity largely recovered this month, also following a similar pattern to a year ago, according to Yahoo’s data.
Yahoo said last month that cyber-thieves in 2013 siphoned information including users’ e-mail addresses, scrambled account passwords and dates of birth. The stolen data may allow criminals to go after more sensitive personal information elsewhere online. The announcement followed news in September of a 2014 breach that affected at least 500 million customer accounts.
The attacks on Yahoo’s system have sparked concerns from regulators and prompted lawsuits. In November, the company said it was cooperating with federal, state, and foreign governmental officials and agencies seeking information about the 2014 hack, including the U.S. Federal Trade Commission and the U.S. Securities and Exchange Commission. In December, following the admission of a second hack, a White House spokesman said the Federal Bureau of Investigation was probing the Yahoo hack as well.
Page views on Yahoo’s main website verticals -- such as news and finance -- didn’t bounce back as strongly as a year earlier. The company pointed to world events in December 2015 that attracted brisk engagement, including stock market volatility and presidential debates.
This is the second time the company has provided the metrics on page views and e-mail activity. In October, the company reported page views on Yahoo properties rose just after the disclosure of a hack in 2014. Also, mail messages sent and read increased, along with searches. Still, some of the metrics showed those increases didn’t hold up after a few weeks.