Yahoo sale delayed to second quarter as Q4 shows modest strides

The purchase of Yahoo's operating business by Verizon has been pushed back to the second quarter of 2017, as the company made a net earnings loss of $214 million for FY2016.
Written by Chris Duckett, Contributor on

Yahoo's financial performance improved slightly in the fourth quarter while the company dealt with the fallout from massive security breaches that have jeopardised the $4.8 billion sale of its internet operations to Verizon Communications.

The fourth-quarter report released on Monday provided the latest snapshot of a shrinking company that has been steadily losing ground in the digital advertising market that generates most of its revenue.

The Sunnyvale, California company earned $162 million during the final three months of 2016 from revenue of $1.47 billion. After subtracting commissions paid to advertising partners, Yahoo's revenue stood at $960 million, down from $1 billion the previous year.

For the same time last year, Yahoo posted a loss of $4.43 billion, which included charges for layoffs and the decaying value of Yahoo's past acquisitions.

For all of 2016, Yahoo's revenue declined by 14 percent to $3.52 billion after deducting ad commissions, marking Yahoo's lowest annual net revenue since 2004. The company posted a full-year net earnings loss of $214 million, a reduction of the $4.4 billion net earnings loss posted a year ago.

Yahoo also disclosed that the closure of the Verizon deal will be delayed for up to three months, with the company looking to close the deal "as soon as practicable".

Instead of closing the deal by the end of March as originally planned, Yahoo predicted that it would now be completed between April 1 and June 30.

"The opportunities ahead with Verizon look bright," Mayer said.

Although cost cutting helped Yahoo bounce back from a loss during the same time the previous year, the company's net revenue slipped yet again to extend a downturn that has lasted through most of chief executive Marissa Mayer's four-and-a-half-year tenure.

In a sign of modest progress, Yahoo's revenue fell 4 percent after subtracting ad commissions, snapping a streak of four consecutive quarters of double-digit declines.

Yahoo's long-running slump culminated in the company's agreement in mid-2016 to sell its email service, websites, and mobile applications to Verizon.

But after striking the Verizon deal, Yahoo revealed that it had been hit by two separate hacking attacks that stole the email addresses, birth dates, answers to security questions, and other personal information from more than 1 billion user accounts.

The break-ins occurred in 2013 and 2014, raising further questions about Yahoo's security controls and the timing of its disclosures.

The Securities and Exchange Commission (SEC) has opened an investigation into whether Yahoo should have announced the security breaches sooner than it did.

Verizon has been doing its own review to determine whether it should renegotiate the sales price or cancel the deal entirely.

In September, Democratic Senator Mark Warner asked the SEC to investigate whether Yahoo and its executives fulfilled its obligations to go public about the 2014 hack.

Before knowing about the second hack, Warner said in a letter to the SEC that public companies such as Yahoo are required to disclose material events that the public and shareholders should know about, noting that "disclosure is the foundation of federal securities law".

Warner asked the SEC to look into whether Yahoo made accurate representations concerning the security of its IT systems.

Six senior US senators said Yahoo's two-year delay in reporting was unacceptable, and asked the Yahoo CEO to explain why the information was not disclosed back when the breach took place.

"Our top priority continues to be enhancing security for our users," Mayer said on Tuesday. "With security protocols and password changes in place, approximately 90 percent of our daily active users have already taken or do not need to take remedial action to protect their accounts, and we're aggressively continuing to drive this number up.

"Our commitment to our users is unwavering, and we continue to be encouraged by their loyalty to us and their ongoing patronage of our products."

In November last year, the European Commission asked for clarification from the US on a secret court order served to Yahoo that forced the company to scan all user emails.

Earlier this month, the European Union justice chief said the explanation provided by Washington was unsatisfactory.

"I am not satisfied, because to my taste, the answer came relatively late and relatively general, and I will make clear at the first possible opportunity to the American side that this is not how we understand good, quick, and full exchange of information," EU Justice Commissioner Vera Jourova told Reuters.

It is expected the parts of Yahoo purchased by Verizon will be integrated with AOL, which itself was purchased for $4.4 billion in 2015.

Once the closure of the Verizon deal is complete, the remnants of Yahoo will be renamed to Altaba Inc, with Mayer to depart from the Altaba board, which will operate as an investment company.

Altaba will hold the current cash reserves of Yahoo, its shares in Alibaba Group Holdings, its shares in Yahoo Japan, and Yahoo's non-core patents, called the Excalibur portfolio.

With AAP

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