Yahoo is running scared after unflattering stories over the last two weeks could disrupt the lifesaver $4.8 billion acquisition deal with Verizon. And its knee-jerk reactions aren't helping.
In late September came word of the massive data breach affecting 500 million accounts that had actually happened two years before. It was only now that people were told. And then, in early October, came the report about Yahoo scanning emails for the feds.
And that's about the time the PR response started faltering, if by faltering we mean dropping out of the sky like a stone.
On the day of the second report, Yahoo issued a statement claiming it was a "law abiding company" and that it "complied with the laws of the United States."
Fair enough. At this point it's common knowledge that the federal government issues security letters that demand companies take steps to turn over information and that, as part of the conditions of the letters, the companies are not allowed to talk about them. But then, the very next day, Yahoo issued the following statement:
The article is misleading. We narrowly interpret every government request for user data to minimize disclosure. The mail scanning described in the article does not exist on our systems.
It was a neck-snapping double-take. If the report was originally wrong, then was the time to say it. What, they don't know what they're doing? As I said at the time, get the CEO and other appropriate executives and the lawyers all on the phone because that's what they're paid to do, and make sure the story is straight.
Now Yahoo is in a fix. The deal hasn't gone through and this is the type of to-do that makes executives nervous and boards rethink the wisdom of completing a deal. At least, that's apparently what a top Verizon lawyer said in person to a bunch of business reporters in Washington, D.C. Given the flat to slightly declining performance Yahoo has seen for years, this was really bad news. The stock lost another 6 percent in value in the last three days.
Yesterday, Yahoo decided to be active and send a statement out to reporters it had been in contact with. It read: "We are confident in Yahoo's value and we continue to work towards integration with Verizon." They may be confident, but there's a good chance that Verizon is demanding a big discount, with Yahoo having little room to negotiate.
And then, today, Yahoo canceled its earnings call next week. The earnings release and supporting materials will still come out after market close on Tuesday. But no call. Yahoo blamed it on the pending transaction with Verizon, but that doesn't ring true. Companies often have earnings calls even as major deals are in the works, and they often take many months to complete.
I'll go with the take of Ben Walsh at Huffington Post, which is that Yahoo wants to dodge uncomfortable questions from the financial analysts that would normally dial in.
This is a display of PR that is so bad it could become a case study for business schools. Hiding from questions and analysts and, therefore, investors is never a good idea. And in a case like this you can't blame the agencies that are sending out the statements, then the restatements. It's Yahoo's call. But then, the problems always have been.