DivX Suing Yahoo! Over Ad Deal

Posted Nov 18, 2008

DivX, Inc. (NASDAQ:DIVX) is suing Yahoo! Inc. (YHOO) over a canceled advertising deal.  Yahoo! planned on signing a two year partnership with DivX, but changed their mind.  This directly affected the financial results that DivX had for 2008 and 2009.

DivX filed the lawsuit at the California Superior Court in Santa Clara, Calif.

Yahoo‘s decision to breach is unjustified given DivX’s fulfillment of its obligations under the agreement,” stated DivX CEO Kevin Hell.

The partnership was decided upon in September 2007.  Yahoo! wanted to settle with DivX out of court to come up with a solution.  But it never came into fruition.

“Yahoo is disappointed with DivX’s decision to pursue legal action rather than renegotiate this agreement,” stated a Yahoo! spokesman. “We intend to vigorously defend ourselves in court, but will reserve further comment until we’ve had an opportunity to review the suit,” the Yahoo spokesman added.

DivX adjusted their 2008 earnings to about $90-$92 million from a previous forecast of $95-$97 million.