Yahoo just lost a deal that brought in $100 million a year in almost pure profit
The deal, struck in 2001, had given Yahoo the right to host AT&T's main website and various applications, while providing its search and content services.
The report estimated that Yahoo brought in roughly $100 million in revenue annually from this deal, most of which were pure profit given the low cost of providing the service.Instead, AT&T has partnered with a company called Synacor to replace Yahoo as its main web service provider, the report said.
Synacor shares were up nearly 90% in after hours following the news. Yahoo shares remain roughly flat.
Yahoo's spokesperson declined to comment on the deal. AT&T's representative was not immediately available for comment.
The news comes at a tough time for Yahoo. The beleaguered web giant has struggled to grow its revenue in recent years, drawing activist investor Starboard Value to pressure the company to sell its core business. Losing a deal that brought in $100 million a year is a big blow for a company seeking a buyer at the highest possible price.
Latest reports indicate big companies like Verizon and private equity firms like TPG to be front-runners for buying Yahoo's core business. Some analysts estimate Yahoo's core business to be worth about $6 billion.