The firm is, after all, going through a lot worth questioning. Yahoo is in the midst of navigating a $4.8 billion sale to Verizon, while simultaneously fielding questions about a massive hack that affected at least 500 million of its users' accounts. Not only that, last week Verizon general counsel Craig Silliman hinted the hack could give Verizon cause to scuttle the deal if Yahoo can't prove the hack hasn't damaged its core value.
In a statement Tuesday, Yahoo said that it skipped the earnings call because of the ongoing negotiations in the Verizon deal.
It's not particularly surprising that Yahoo canceled its call, said Fatemeh Khatibloo, principal analyst at Forrester. Yahoo's hands, she said, are tied when it comes to what it can say about the breach or the acquisition.
Mayer did, however, issue an anodyne statement in an earnings release. “I am pleased with our Q3 results,” she said. “In addition to our continued efforts to strengthen our business, we are busy preparing for integration with Verizon. We remain very confident, not only in the value of our business, but also in the value Yahoo products bring to our users’ lives.”
Analysts expected Yahoo to report earnings of 14 cents per share, excluding some expenses — slightly lower than the same time last year — and revenue of $1.31 billion from $1.23 billion. Yahoo shares rose nearly 2 percent immediately after the results were announced.
Yahoo significantly cut costs in the third quarter, helping to improve its bottom line. The company's overall revenue was up 6.5 percent from the same period last year, but revenue from its core advertising and Web business actually dropped 14 percent to $857.7 million from $1 billion. Revenue from the firm's “Mavens” business — Yahoo's term for mobile, video, native and social ads and a core focus for Mayer — saw a 24 percent bump, to $524 million.
Still, if company watchers were expecting any information about the hack or the ongoing negotiations with Verizon, they were disappointed. Apart from a brief mention of Verizon in Mayer's statement, there was no meaningful update offered either in the financial filings or the company's earnings slide show.
As for the hack itself — the largest personal data theft in history — Mayer said that Yahoo is going to work to “retain” users' trust. But the company did not address the attack further, apart from a slide that showed engagement with Yahoo has not dropped since the company announced the attack. In some cases, engagement has actually gone up.
But Khatibloo said that Yahoo's rise in engagement could be from "all those people trying to figure out if they're one of the 500 million who were affected."
Still, ongoing confusion about what Yahoo knew about the hack and when has further clouded its deal with Verizon. Yahoo confirmed that it first opened an investigation into the massive hack in August; Yahoo estimates the hack itself happened in 2014. But the tech firm said in a Sept. 9 filing to the Securities and Exchange Commission, regarding the proposed merger, that it had no knowledge of a significant breach or hack of its systems.
According to Verizon, the telecommunications giant only learned of the hack two days before it was announced.
Analysts think that Verizon will still buy Yahoo, but use the hack revelation to get a discount.
“Our guess is that while Yahoo may need to provide some consideration to Verizon (i.e. reduced acquisition cost or indemnification), the transaction will still go through,” said Brian Wieser, senior research analyst at Pivotal Research Group, in a note to investors ahead of earnings. “Toward these ends, we are assuming the transaction still provides Yahoo with $3.8 billion, rather than the $4.8 billion that was initially agreed to.”
Even with additional negotiations, however, analysts said the deal is likely to largely continue as planned.
“We do not expect [Verizon] to cancel the transaction,” said Scott Kessler, an analyst at research firm CFRA, in a note to investors. He also said that Verizon may use the breach to seek “more favorable terms” but expects that the transaction will still close by March as originally planned.