Digital River Inc. (NASDAQ: DRIV) entered into a material agreement with Microsoft Corp. (NASDAQ: MSFT) that will extend the Microsoft Operations Digital Distribution Agreement to March 31, 2017.

Earlier in December, Digital River extended the deadline for Microsoft to make its decision. Shares of Digital River did not respond well to this and dropped roughly 23% to $19.71 on December 8. The threat of losing Microsoft is very real and could have negatively impacted the business.

24/7 Wall St. went to Digital River’s 2013 Annual Report (10-K) filed with the U.S. Securities and Exchange Commission (SEC) from earlier in 2014. When we started searching for Microsoft and contracts, there is a lot to the story.

Digital River said in its cautionary statement to its annual report:

We are subject to a number of risks, some of which may be similar to those of other companies of similar size in our industry, including rapid technological changes, competition, customer concentration, failure to successfully integrate acquisitions, adverse government regulations, failure to manage international activities, income we may not realize from our Microsoft relationship and loss of key individuals.

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Digital River further detailed its relationship with Microsoft in the risk factors segment:

The termination of our e-commerce agreement with Microsoft may materially adversely affect our business, financial condition or results of operations and stock price. Sales of products for one client, Microsoft, accounted for approximately 32.5% of our revenue in 2013. In addition, a limited number of other software and physical goods clients contribute a large portion of our annual revenue. If any one of these key contracts is not renewed or otherwise terminates, or if revenues from these clients decline for any other reason (such as competitive developments), our revenue would decline and our ability to sustain profitability would be impaired. If our contract with Microsoft is renegotiated, not renewed, or is otherwise terminated, or if revenues from Microsoft decline for any other reason, our revenue and our ability to sustain profitability could be materially adversely impaired.

Shares of Digital River were up over 42% at $24.05 midday Wednesday. The stock has a consensus analyst price target of $22.57 and a 52-week trading range of $13.61 to $25.88.

Shares of Microsoft were up less than 1% at $45.44. The consensus price target is $49.84, and the 52-week range is $34.63 to $50.05.

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