Yahoo! (YHOO) fell sharply Friday because of the news that AT&T (T) is considering either dropping or renegotiating the DSL pact that SBC had with Yahoo. There was an estimated $230 to $325 million in revenues at risk to Yahoo over this, and this one was deemed to have high margins. There are two pieces of information that may actually come to the rescue today.
Reuters has a report stating that Yahoo! is in talks with AT&T’s Cingular unit for a mobile search bundling pact. The news doesn’t mean that the lost business would be entirely made up for, but this would help to offset the potential DSL losses if that occurs.
The other issue is a note buried in the Goldman Sachs research this morning. Goldman Sachs has said it previously noted that they could lose $235 million to $320 million in revenues and $170 million to $235 million in EBITDA. But now it says that Yahoo! would co-own the joint subscribers if the existing contract ended. In a sense that means that the bleed-off would not be instant, and AT&T would be required to continue paying Yahoo! as long as the subscribers remain in the current status. So now this implies that the drop in revenues would have to be driven by a decline in subscribers rather than just by a contract termination alone. If that is the case then it would not be as bad as it appeared on Friday, even if it is still not a net “good” event.
Jon C. Ogg
March 12, 2007
Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.
Top Gaining Stocks
Top Losing Stocks