Commenting on the recent story in the wall Street Journal saying that Yahoo (YHOO) was a risk of losing a big chunk of revenue when their contract with AT&T (T) comes up next year, was vastly overblown a source responding to the report said.
The Journal reported that Yahoo could lose up to $250 million a year if they weren't able to work out a deal with AT&T.
Scott Devitt of broker Stifel Nicolaus warned in a research note to clients that "Yahoo is likely in jeopardy of losing its AT&T deal, or at least a reworking of the deal that could materially scale back the relationship."
As a result of the innuendo, Yahoo shares dropped by 5.2 percent to finish at $29.12 on the Nasdaq.
Yahoo spokesman Mark Plungy called the Journal story "rumor and speculation" and gave confirmation that the talks are continuing. "AT&T and Yahoo's ongoing partnership is rooted in the open and ongoing dialogue we maintain about future opportunities," he said.
To me this is unfortunate in that Yahoo had been recovering nicely this year with their shares rising by 20 percent before this Journal report.
According to a source close to the negotiations, the Journal story wasn't really based in reality as there is a provision in the existing contract that AT&T customers that have signed on with Yahoo will stay with Yahoo, no matter if AT&T chooses to renew the contract or not. That makes the downside risk extremely small.
Not only that, but the two companies are actually working on new areas which they can partner in, through TV and mobile partnerships as broadband growth has peaked. Not a sign that negotiations are bogging down at all.
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