Shares of San Diego digital video provider DivX (NASDAQ: [[ticker:DIVX]]) fell more than 17 percent in early trading, hitting $4.53 a share shortly before noon ET, after DivX said its financial results would be hurt following Yahoo’s decision to breach a two-year advertising deal. In a regulatory filing last night, DivX said it had filed a lawsuit against Yahoo in California Superior Court in Santa Clara County, seeking damages and to enforce specific terms of the 2007 agreement.
“Yahoo’s decision to breach is unjustified given DivX’s fulfillment of its obligations under the agreement,” DivX CEO Kevin Hell said in the company’s statement. CFO Dan Halvorson said in the same statement that Yahoo’s action will have an immediate effect on the San Diego company’s fourth-quarter financial results.
DivX says its 2008 revenues are now expected to fall within a range of $90 million to $92 million, down from its previous estimates of $95 million to $97 million. The company lowered its non-GAAP earnings per share estimate by 9 cents—to 49 cents to 51 cents.
Yahoo told Reuters it has been working with DivX to restructure their previous agreement, but the two companies could not come to an amicable resolution.
“Yahoo is disappointed with DivX’s decision to pursue legal action rather than renegotiate this agreement,” said a company spokesman. “We intend to vigorously defend ourselves in court, but will reserve further comment until we’ve had an opportunity to review the suit.”
Author: Bruce V. Bigelow
In Memoriam: Our dear friend Bruce V. Bigelow passed away on June 29, 2018. He was the editor of Xconomy San Diego from 2008 to 2018. Read more about his life and work here.
Bruce Bigelow joined Xconomy from the business desk of the San Diego Union-Tribune. He was a member of the team of reporters who were awarded the 2006 Pulitzer Prize in National Reporting for uncovering bribes paid to San Diego Republican Rep. Randy “Duke” Cunningham in exchange for special legislation earmarks. He also shared a 2006 award for enterprise reporting from the Society of Business Editors and Writers for “In Harm’s Way,” an article about the extraordinary casualty rate among employees working in Iraq for San Diego’s Titan Corp. He has written extensively about the 2002 corporate accounting scandal at software goliath Peregrine Systems. He also was a Gerald Loeb Award finalist and National Headline Award winner for “The Toymaker,” a 14-part chronicle of a San Diego start-up company. He takes special satisfaction, though, that the series was included in the library for nonfiction narrative journalism at the Nieman Foundation for Journalism at Harvard University.
Bigelow graduated from U.C. Berkeley in 1977 with a degree in English Literature and from the Columbia University Graduate School of Journalism in 1979. Before joining the Union-Tribune in 1990, he worked for the Associated Press in Los Angeles and The Kansas City Times.
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