5 Companies That Had A Rough Week

The Week Ending Oct. 6

Topping this week's roundup of those having a rough week is Verizon, which disclosed this week that a 2013 security breach at Yahoo – which Verizon bought earlier this year for $4.48 billion – impacted 3 billion user accounts, not 1 billion as thought earlier.

Also making the list this week are Sirius Computer Solutions, whose credit rating was cut this week because of the debt it is amassing to acquire Forsythe Technology; Lenovo, which faces dissension from its partners over channel program changes that will diminish their profit margins; Brocade partners, for whom the resolution of the Broadcom acquisition couldn't come soon enough; and Amazon, which was ordered by the European Commission this week to pay $295 million in taxes.

Not everyone in the IT industry was having a rough go of it this week. For a rundown of companies that made smart decisions, executed savvy strategic moves – or just had good luck – check out this week's Five Companies That Came To Win roundup.

Investigators Find That Yahoo Breach Likely Affected 3 Billion Users

Verizon Communications may be wishing it pushed for a bigger discount on its Yahoo acquisition.

This week Verizon said the August 2013 security breach of its Yahoo subsidiary exposed all 3 billion Yahoo user accounts, not the 1 billion Yahoo initially estimated. Hackers gained access to names, birth dates, phone numbers and user passwords.

Verizon struck a deal in July 2016 to acquire Yahoo for $4.83 billion. However, Verizon renegotiated that price after news of the 2013 security breach got out in September 2016 (plus another attack in 2014 that affected some 500 million Yahoo accounts), eventually settling on a price $350 million less. The $4.48 billion acquisition was completed on June 13 of this year.

Reuters reported in March that Verizon initially sought a $925 million discount for the Yahoo purchase.

Sirius' Credit Rating Is Cut By Moody's Investors Service On Fears That Forsythe Acquisition Will Strain Finances

Moody's Investors Service lowered Sirius Computer Solutions' credit rating from B1 to B2 this week out of concern that the company's planned purchase of Forsythe Technology will strain its financial flexibility.

The bond credit rating agency publicly disclosed that Sirius is paying $350 million to buy Forsythe and that the acquisition would be funded largely with debt. The ratings downgrade could affect Sirius' ability to borrow money, with investors seeing the company as a riskier bet and demanding higher returns.

Earlier this week Sirius confirmed its deal to acquire Forsythe – albeit without disclosing the acquisition cost – in a move that will create a $3.26 billion solution provider powerhouse.

Lenovo Partners: Channel Program Changes Will Drive Sales To HP, Dell

It was not a great week for Lenovo-channel partner relationships. Partners say a move by Lenovo to cut back-end payments, spiffs and program discounts in its $30 billion PC business in a series of steps will dramatically cut partner profit margins and ultimately result in shifting business to competitors like HP Inc. and Dell Technologies.

Lenovo is eliminating the cost-minus pricing structure that allowed distributors to offer discounts to partners while still maintaining gross margin, according to sources. Solution providers expect the changes to cut their profit margins by as much as 30 percent to 50 percent.

Lenovo executives confirmed that changes to the company's partner program, intended to push partners to sell higher-end products and services, went into effect Oct. 1. However, they would not provide details.

One partner, speaking to CRN, expects millions of dollars in sales from his Lenovo PC business to move to Dell or HP.

Brocade And Ruckus Partners Frustrated By Delayed Broadcom Acquisition Of Brocade

Broadcom's $5.9 billion acquisition, announced nearly one year ago, has been delayed as it undergoes federal government scrutiny. And that is causing headaches for solution providers that work with Brocade and its Ruckus Wireless business.

While Broadcom expected to complete the acquisition by Aug. 1 of this year, the Committee on Foreign Investment in the United States (CFIUS) halted the process in July to further review the deal. Broadcom now expects the acquisition to close by Nov. 1.

Once the deal closes, Broadcom plans to sell the switching and Ruckus Wireless businesses to Arris International.

But partners say the delay is causing concern among customers – especially about the status of Brocade's switching line – and partners are looking for the deal to close to help stabilize the situation, one partner told CRN. Another partner said the delay is creating support issues and other difficulties for partners.

EU Orders Amazon To Pay $295 Million In Back Taxes

Even for Amazon, $295 million is a big chunk of change.

This week the European Commission ordered Amazon to pay about 250 million Euros ($295 million) in back taxes to Luxembourg, saying the country gave Amazon illegal tax benefits.

The Commission said Luxembourg allowed Amazon to channel a significant portion of its profits to a holding company without paying taxes, according to a Reuters story. That resulted in almost three quarters of the online retailer's profits going untaxed.

Amazon is considering appealing the ruling, the Reuters story said.

The amount Amazon was ordered to pay was much lower than some observers had expected, the story said, and was far below the $15.3 billion the Commission has ordered Apple to pay in a similar case involving taxes in Ireland.