AT&T-Yahoo Issue Statement Following Report Partnership Could End Or Be Altered


This could be filed under non-denial denial … AT&T and Yahoo issued a joint statement today responding to “speculation regarding their partnership” — and the results of that speculation, which cost Yahoo more than 5 percent of its stock price today. The speculation came via the lengthy, anonymously sourced WSJ article we told you about Thursday night that suggested the two were on the verge of either a splitup or a major shift, with AT&T having the upperhand.
The release featuring AT&T COO Randall Stephenson and Yahoo CEO Terry Semel stresses the “ongoing business agreement” and constant discussions of “opportunities to expand our relationship and associated revenue streams.” Those discussions already have led to ads on the front page of the co-branded portal; advertising starting later this month in the email service; and the integration of Yahoo services into AT&T IPTV later in 2007. Expansion into mobile is on the table now that AT&T has full control of Cingular. But there’s no sense of the kind of revenue they expect from these efforts or whether anything under discussion could make up for downsizing fee payments.
— Semel: : “AT&T and Yahoo have already made adjustments over the years to reflect competitive conditions and the relative benefits each party brings to the relationship. As we continue our conversations, we have a common goal to increase the economic benefits for both parties.” Release.
The statement came too late for Friday’s market, where Yahoo lost some of its recent gains.As AP: points out: “Before Friday’s downturn, Yahoo’s stock had climbed by 20 percent this year, rebounding from a horrible 2006 performance. That reflected Wall Street’s widespread belief that Yahoo will prosper from a month-old upgrade to its formula for linking ads to search requests. But a reshuffling of the AT&T deal would deliver a substantial blow.” The deal is believed to be worth $200-250 million annually to Yahoo — more than a quarter of the company’s total fees collected last year, and as S&P’s Scott Kessler estimates, between $30-70 million of its profit.
One reason for the concern: the idea that other carriers with similar deals will follow AT&T’s lead — whatever that is. It’s a blow for Yahoo just when it sounded like the company was gaining traction. Someone, somewhere had a tin ear for the potential damage of that WSJ story and the kind of response that was needed.

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