As a company still riding its wave of late '90s popularity, Yahoo is a company out of time. Its poor timing has really bitten it in the ass this year though, as while trying to accept a buyout from Verizon to the tune of near $5 billion, it's been faced with embarrassing set backs, leaving Verizon dropping its offer by a cool $1 billion.
Yahoo has had a rough time of it in recent months. On top of announcing its sale to Verizon for $4.8 billion – a large drop off from the $100 billion it was valued at in 2000 – it's had to deal with half a billion of its accounts having been hacked and the revelation that it helped an intelligence agency spy on its entire user base. It's left the company looking weak and willing to autonomously monitor anyone who even interacts with a Yahoo email address.
This is not a good time to be selling, but Yahoo is pinned in the corner and Verizon knows it, hence the request that it drop a billion off of the price it was planning to pay for the aged internet firm. It argues (as per NYPost) that Yahoo's value and brand image have been severely impacted by these events and that not enough was disclosed before the original purchase price was agreed upon.
The fact that Verizon is still interested however suggests that it has little interest in ditching the deal, it just wants to take advantage of the situation. When combined with its AOL business, the Yahoo purchase will give Verizon access to huge numbers of internet users for its advertising online, potentially making it a decent competitor for the likes of Google and Facebook, which dominate online ads as it stands.
Yahoo is said to be negotiating hard to try and prevent the price of the deal from collapsing, but considering it's unlikely to get a better offer now news of the discount demands has broken, it doesn't have much of a leg to stand on.
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KitGuru Says: It's pretty amazing that anyone is willing to pay even this much for Yahoo at this point. It's one of those companies that I'm still surprised is operating at all.