For the past few years, Yahoo! CEO Marissa Mayer has been coming out in public every three months to insist that despite all the red ink to the contrary, things are going tickety-boo with whatever this quarter’s latest transformation plan happened to be.
But yesterday she was nowhere to be seen as Yahoo! canned its usual analyst conference call, citing the (for now) forthcoming takeover by Verizon.
That’s the official reason, at any rate. The more cynical among us might wonder whether it’s also an expedient way to avoid any difficult questions about the hacking of 500 million accounts last year, such as when did Mayer find out about the breach and why wasn’t it disclosed to Verizon?
The cancellation also meant that there was no opportunity to discuss reports that Yahoo! complied with a US government court order to scan emails for terrorist digital signatures. So no ‘why have you been giving away user data?’ questions to try to spin.
Yahoo has said the data breach was discovered after the merger deal was signed in July. but last week, Verizon’s general counsel stated that the breach might allow the company to renegotiate the deal’s terms. Craig Silliman said that Verizon had a “reasonable basis” to believe that the hack could have had a “material” impact on the company’s value, leading many to suspect that the acquirer already has a bad dose of ‘buyer’s regret’.
Mayer’s no show also meant that there was no opportunity to ask some difficult questions about the firm’s third quarter numbers, which on the face of it, saw something of an uptick. Overall revenue rose 6.5% in the third quarter to $1.23 billion, while net income was up year-on-year from $76.3 million to $162.8 million.
But the profit jump is largely coming from cost-cutting rather than genuine growth as well as changes to revenue recognition. Display ad revenue was down 7% while search revenue was down 14%. Revenue from ‘Mavens — mobile, video, native and social ads—was seemingly up 24% to $524 million under the new rev rec practices, rather than down 6.3% to $397 million under the old mechanisms.
For its part, Yahoo! insisted that the revelations about the hacking have had no impact on customer usage of its email and pointed to page view increases. In a canned comment, Mayer said:
We're working hard to retain [users'] trust and are heartened by their continued loyalty as seen in our user engagement trends.
It’s entirely possible, of course, that this supposed customer loyalty is the result of worried Yahoo! users checking out their accounts to see if they have been breached. The notion that in the wake of one of the worst hacks on record that users rush to make more use of the hacked provider in question seems counter-intuitive to say the least.
As Mayer wasn’t available to address these issues, that must remain mere speculation. What she did say, in another canned comment, was that she still believes Verizon’s getting a good deal here:
We remain very confident, not only in the value of our business, but also in the value Yahoo products bring to our users' lives.
Will Verizon pull out? I doubt it, but a revised offer must be on the cards. All the signs are that the firm isn’t happy with the progress of getting information related to the data breach out of Yahoo! At a recent Silicon Valley conference, Verizon CEO Lowell McAdam, admitted:
We’re still understanding what was going on, to define whether it's a material impact to the business or not... I'm hoping we can get through all this stuff and get to the close [of the deal].
What’s critical for Yahoo! here is that Verizon can’t get to a position of proving a Material Adverse Condition that would enable it to pull out of the deal. That would give the acquirer a massive bargaining chip if it chose to use it or the get out clause that it needs if it decides to cut and run.