Ever wondered what the real cost of a data breach is? Verizon says Yahoo hack is grounds for discount
Just a few days ago we mentioned the Yahoo Hack, the biggest data breach known to date [here]
Verizon said that Yahoo’s massive data breach that was disclosed three weeks ago was a significant event that could change their decision to purchase Yahoo at $4.8Billion.
“I think we have a reasonable basis to believe right now that the impact is material,” Verizon General Counsel Craig Silliman said of the breach, speaking to a small group of reporters at a roundtable. A “material” effect, in this case, is one that would harm Yahoo’s financial value, and make the Web giant less attractive to purchase.
Needless to say, this deal is very important to Yahoo stakeholders. Yahoo was not doing well and the sale to Verizon was an important lifesaver to many. Now, these revelations of Verizon’s internal deliberations threaten to cast an even bigger cloud over Yahoo’s future.
The deal between Verizon and Yahoo is expected to close in Q1 2017.
Verizon said that Yahoo needs to prove that the breach hasn’t damaged its value.
“We’re looking to Yahoo to demonstrate to us the full impact they believe it’s not,” Silliman said.
If Verizon concludes the breach did affect Yahoo’s business and value, then a key condition of the deal would not be met, he said. Analysts say that could trigger an escape clause in the agreement to allow the telecom company to back out of the deal.
Yahoo said in a statement: “We are confident in Yahoo’s value and we continue to work toward integration with Verizon.”
Yahoo said it discovered the Yahoo Hack, the largest recorded in history, in August 2016. They claim it occurred in 2014 and affected at least 500 million user accounts. The company blamed the Yahoo Hack on “state-sponsored” hackers.
Silliman said Yahoo has disclosed information to Verizon “preliminary briefings” on the Yahoo Hack, “but we’re certainly not done with the amount of information we need to receive from them. … We still have a significant way to go in terms of the information we need to get before we can make our final determinations.”
The investigation of the Yahoo Hack is currently 50-60% complete, said Verizon chief executive Lowell McAdam this week.
Attorney Silliman made is clear that the nature of the Yahoo Hack would have no bearing on the analysis of materiality (If there is a value reduction to Yahoo). “From a legal perspective,” he said, “the question, ‘is it a state-sponsored attack?’ isn’t really relevant in terms of what we’re looking at. The question is whether this [had] a material or an adverse effect on the asset we are buying.”
A report last week from the New York Post suggested Verizon could seek a $1 billion discount on the deal. Craig Moffett, a telecom analyst at MoffettNathanson said: “declaring the hack to be a [material adverse change] is a clear prerequisite for demanding a price concession, so that is obviously the next shoe to drop.”