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Yahoo's Firefox deal risks dropping into the red

Gregg Keizer | April 22, 2016
With annual payments of US$375 million and a rapidly declining share for Firefox, Yahoo could lose money on the 2014 search contract this year.

Whether that can be repeated in 2016 is unclear; at the moment it appears doubtful. In the first three months of this year, Firefox's U.S. usage share was down 10.2% from 2015's annualized share. If that drop-off is maintained throughout 2016, and Firefox's lower share resulted in a corresponding decline in the revenue generated by Yahoo from the partnership, Yahoo would recognize $40 million less than last year, putting it in a $21 million hole on the deal.

As Arthur pointed out, also unknown is what may happen to the Yahoo-Mozilla contract if or when Yahoo unloads its core businesses, as it is currently exploring. Computerworld was unable to find any SEC filings by Yahoo that spelled out the contract with Mozilla to, for instance, determine whether it had a cancellation clause.

If the deal did not provide for cancellation, Yahoo's new owner will owe Mozilla $1.5 billion over the next four years.

The fact that Yahoo said it "is obligated to make payments" through 2019 to Mozilla hinted that a buyer would be committed to maintaining the contract and the $375 million annual payments.

 

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