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UPDATE 1-DivX sues Yahoo over advertising deal; cuts '08 view

Mon Nov 17, 2008 5:51pm EST

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Nov 17 (Reuters) - Video compression software maker DivX Inc (DIVX.O) said it filed a lawsuit against Yahoo Inc (YHOO.O) for planning to end a two-year advertising services agreement.

DivX also said the termination would hurt its results for 2008 and 2009.

The lawsuit was filed in California superior court in Santa Clara County, seeking damages and specific performance under the agreement, which was announced in September 2007 .

"Yahoo!'s decision to breach is unjustified given DivX's fulfillment of its obligations under the agreement," said Chief Executive Officer Kevin Hell, adding that his company would aggressively pursue legal action.

The company said it now sees adjusted earnings for fiscal 2008 of 49 cents to 51 cents a share on revenue of $90 million to $92 million, compared with its previous forecast 58 cents to 60 cents a share on revenue of $95 million to $97 million.

Shares of DivX dropped 11 percent to $4.92 in trading after the bell. They closed at $5.53 Monday on Nasdaq.

(Reporting by Antonita Madonna Devotta in Bangalore; Editing by Anil D'Silva)



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