DivX Sues Yahoo

    November 18, 2008

We all know that Yahoo’s looking to cut costs.  Now, according to a new lawsuit filed by DivX, the search company went a little too far and backed out of two-year advertising services agreement.  DivX would stop receiving payments as a result.

DivX claims that this will have a big effect on its business, and doesn’t appear to be kidding around.  The lawsuit was announced at the same time it lowered revenue and earnings estimates, and its stock dove by about 22 percent today.

Dan Halvorson, DivX’s CFO and executive vice president, acknowledged in a statement, "Absent further developments, we believe this action by Yahoo! will impact the fourth quarter of 2008, as well as fiscal year 2009, since the Yahoo! agreement terminates by its terms on December 31, 2009."

So Kevin Hell, DivX’s CEO, has promised, "The Company will aggressively pursue legal action to ensure that Yahoo! honors its obligations under this agreement."

The lawsuit has been filed in California Superior Court in Santa Clara County, California.  No specific dates have been tied to future developments, and although no names have been given out, Divx has implied that it will look for new partners.