The Material Costs of a Data Breach

Following the disclosure of a record data breach, Verizon seeks a renegotiation of its purchase of Yahoo

An article review.


While it can be difficult to estimate the full material costs of a data breach, they can be substantial enough to impact business deals years down the road, as Yahoo is discovering this week.

Lawyers from Verizon are asking Yahoo to provide estimates on the fallout of a 2014 breach, hoping the material costs of the incident could allow them to renegotiate their recently announced purchase of their operating business. While the deal is still expected to go through, if it failed it could also impact the potential sale of Yahoo’s foreign assets.

Guidance from the SEC on cyber attacks warns businesses to expect material losses from data breaches, including lost customers and revenue, while a study by the Ponemon Institute estimates it can cost as much as $220 per stolen record to remediate a data breach–a number which, if accurate, would be more than the amount Verizon has reportedly offered for Yahoo.

Additionally the prospect of customers walking away could impact the value of the Yahoo transaction, with Verizon reportedly being interested in the company because of its user base. Adding to fears Yahoo has begun disallowing email forwarding, making it difficult for them to leave for other services.

The Yahoo deal is reportedly valued at $4.8 billion.

Original article by By Vindu Goel and Nicole Perlroth of The New York Times.



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