DivX Revises 2008 Guidance; Files Lawsuit Against Yahoo! for Intentional Breach of Contract
November 17 2008 - 4:05PM
PR Newswire (US)
Yahoo! Informs Company of Intention to Cease Required Payments
Under Advertising Services Agreement SAN DIEGO, Nov. 17
/PRNewswire-FirstCall/ -- DivX, Inc. (NASDAQ:DIVX), a digital media
company, today announced a revision to its revenue and earnings
estimates for the fiscal year ending December 31, 2008, following
notification from a major advertising customer, Yahoo!, Inc. that
it intends to breach the two-year advertising services agreement
announced in September 2007 between the two companies and
discontinue making payments required under the agreement. As a
result, DivX has filed a lawsuit in California Superior Court in
Santa Clara County seeking damages from Yahoo! and specific
performance under the agreement. "Yahoo!'s decision to breach is
unjustified given DivX's fulfillment of its obligations under the
agreement," said Kevin Hell, Chief Executive Officer for DivX. "The
Company will aggressively pursue legal action to ensure that Yahoo!
honors its obligations under this agreement." The Company
anticipates that its revenues for 2008 will range from $90 million
to $92 million as compared to its previous estimates of $95 million
to $97 million. In addition, the Company anticipates its non-GAAP
EPS for 2008 will range from $0.49 to $0.51 as compared with its
previous estimates of $0.58 to $0.60. Media and other distribution
services are now expected to be 15% to 20% of total revenues for
fiscal year 2008 as compared to the previously announced range of
15% to 25%. "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," said Dan Halvorson, Executive Vice President
and Chief Financial Officer. Revised Full Year 2008 Earnings
Guidance Updated FY '08 FY '08 Guidance Guidance (Provided on
October 30, 2008) Revenue (in millions) $90 - $92 $95 - $97 GAAP
earnings per share, diluted $0.20 - $0.22 $0.29 - $0.31
Adjustments: Non-cash share-based compensation expense, net of
income taxes $0.16 $0.16 Stage6 related expenses, net of income
taxes $0.06 $0.06 Impairment of intangible asset, net of income
taxes $0.03 $0.03 Amortization of purchased intangibles, net of
income taxes $0.04 $0.04 FX (gain) / loss on Euro-based
intercompany loan, net of income taxes $0.00* $0.00* Non-GAAP
earnings per share, diluted $0.49 - $0.51 $0.58 - $0.60 * No
further impact is assumed for Euro FX fluctuation at this time. "We
believe the current economic environment will continue to be
challenging, but we plan to operate our business in a disciplined
manner, while maintaining tight control of expenses," said Kevin
Hell. "We are focused on continuing to drive our core licensing
business, and will diligently pursue alternatives to replace the
Yahoo! deal and continue to grow our software distribution
business." Conference Call and Audio Webcast DivX management will
host a conference call and simultaneous audio webcast to discuss
today's announcements at 2:00 p.m. Pacific Time or 5:00 p.m.
Eastern Time. To participate in the call, please dial 877-723-9509
or outside the U.S. 719-325-4802 to access the call at least five
minutes prior to the start time. A live audio webcast will be
available on the Events and Presentations page at
http://investors.divx.com/. In addition, an audio replay of the
call will be available between 8:00 p.m. Eastern Time November 17,
2008 and Midnight, Eastern Time November 21, 2008 by calling
888-203-1112 or 719-457-0820, with passcode 8537714. About DivX,
Inc. DivX, Inc. is a digital media company that enables consumers
to enjoy a high-quality video experience across any kind of device.
DivX creates, distributes and licenses digital video technologies
that span the "three screens" comprising today's consumer media
environment -- the PC, the television and mobile devices. Over 100
million DivX Certified devices have shipped into the market from
leading consumer electronics manufacturers. DivX also offers
content providers and publishers a complete solution for the
distribution of secure, high-quality digital video content. Driven
by a globally recognized brand and a passionate community of
hundreds of millions of consumers, DivX is simplifying the video
experience to enable the digital home. Forward-Looking Statements
Statements in this press release that are not strictly historical
in nature constitute "forward-looking statements." Such statements
include, but are not limited to, the top-line growth and earnings
potential of the core DivX business, the Company's position in the
digital media space, plans for expanding the Company's core
licensing business, expectations for DivX Connected, plans for
extending the Company's content licensing partnerships, the
Company's ability to recover damages and/or replace lost revenues
as a result of Yahoo!'s breach of the advertising services
agreement, and anticipated financial results for the full years
2008 and 2009. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause
DivX's actual results to be materially different from historical
results or from any results expressed or implied by such
forward-looking statements. These factors include, but are not
limited to: the risk that customer use of DivX technology may not
grow as anticipated; the risk that anticipated market opportunities
may not materialize at expected levels, or at all; the risk that
the Company's activities may not result in the growth of profitable
revenue; the risk that the Company may not recover damages and/or
replace lost revenues as a result Yahoo!'s breach of the
advertising services agreement; the risk that the Company's
financial performance for the full years 2008 and 2009 may not meet
expectations; risks and uncertainties related to the maintenance
and strength of the DivX brand; DivX's ability to penetrate
existing and new markets; the effects of competition; DivX's
dependence on its licensees and partners; the effect of
intellectual property rights claims; and other factors discussed in
the "Risk Factors' section of DivX's most recent reports filed with
the Securities and Exchange Commission. All forward-looking
statements are qualified in their entirety by this cautionary
statement. DivX is providing this information as of the date of
this release and does not undertake any obligation to update any
forward-looking statements contained in this release as a result of
new information, future events or otherwise, other than as required
under applicable securities laws. DATASOURCE: DivX, Inc. CONTACT:
Investor Relations, Karen Fisher, +1-858-882-6415, , or Media, Tom
Huntington, +1-858-882-0672, , both of DivX, Inc. Web site:
http://www.divx.com/
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