Why Verizon Just Found Out About Yahoo's Security Breach This Week

There is a real possibility the Yahoo! Inc. (NASDAQ: YHOO) disclosure regarding the hacking of 500 million users could have severely negative implications for the proposed Verizon Communications Inc. (NYSE: VZ) acquisition of Yahoo.

The telecom service provider responded cautiously without elaborating its position in the issue.

However, there is no doubt that the revelation was shocking for not only the users but even Verizon, which agreed to pay $4.83 billion. Strangely, the incident happened in 2014 but was only just disclosed; furthermore, Verizon came to know about it a few days back.

Related Link: Yahoo's Account Hack Raises Questions About Potential Impact On Verizon Deal

One of the reasons that attracted the telecom service provider to Yahoo was the user base. Verizon's objective is to integrate Yahoo and AOL to remain third placed in the digital world after Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL)'s Google unite and Facebook Inc (NASDAQ: FB).

The breach could become a big headache for the merger, which is expected to happen in the first quarter of next year. Perhaps most concerning for Verizon is the potential user exodus, particularly in light of the significance of the user base toward the acquisition justification.

According to CNN Money, SunTrust analysts estimate the hacking has the potential to reduce the acquisition price between $100 million and $200 million. Verizon made it clear that it would comment on the breach after evaluating the impact to both consumers and customers.

There is also a call from Sen. Richard Blumenthal to investigate whether Yahoo has deliberately kept the breach issue under the carpet in order to inflate valuation.

Full ratings data available on Benzinga Pro.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email feedback@benzinga.com with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!