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AT&T Lets its Fingers do the Walking – All Over Yahoo!

By | March 23, 2007 4:26 pm

The mainstream media have been fixating, unsurprisingly, on Viacom’s effort to get $1 billion from Google, almost two-thirds of what the search engine giant paid for YouTube, as copyright damages caused (allegedly) by the still pretty fledgling video-sharing upstart.

But another Old Media versus New Media struggle is also worth reporting on.

Google’s struggling search rival – Yahoo! – has found its efforts to stage a big revival being seriously dented by its interaction with AT&T, now the world’s biggest telecom company once again.

Yahoo shares fell by a worrying 5% recently when word got about that AT&T wanted to alter the terms of their partnering venture for delivering digital subscriber lines (DSL) for high-speed internet access.

It seems that that AT&T is now willing to share only a much smaller proportion of the revenue that the six-year-old deal pulls in. Industry observers reckon a change could cost Yahoo some $200 million to $250 million a year in this area of especially high-margin returns – while it has been used to annually getting an estimated $800 million out of the partnership.

The setback served to renew skepticism about Yahoo among many investors. Its shares dropped severely last year after a series of awkward and very public wobbles. There were fallings-short of predicted earning, and an embarrassing delay in the rollout of its Project Panama advertising system.

Share prices did recover with the arrival of 2007 – by a welcome 20%, indeed – but this recent brouhaha over AT&T prompted the company to try simply bluffing it out – rather than display anything of substance to reassure the investing community.

It merely dismissed the story as “rumor and speculation” while acknowledging that negotiations have been taking place. “As we continue our conversations, we have a common goal to increase the economic benefits for both parties”, said Chief Executive Terry Semel.

Those conversations, according to some in Wall Street, could even mean that AT&T would actually take Yahoo over in the end. It’s a move the telecom outfit has considered in the past, and now in many ways the search engine/web portal looks to some AT&T executive to be a wounded animal, especially in the wake of the share-price slip, which docked a whopping $8 billion off Yahoo’s market value.

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Founded in 1998, ECommerce Partners is a full-service, ecommerce and interactive agency headquartered in New York City. Best known for our unique process methodology, we combine Internet expertise, creative talent, and business know-how to help clients across a variety of industries achieve rapid, measurable online marketing results.

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