Yahoo, AT&T alliance on the rocks?

UPDATED: A negative story in WSJ can be seriously injurious to one’s wealth. The news of AT&T and Yahoo “renegotiations” wiped out nearly 5% of Yahoo’s market capitalization, prompting the two companies to issue a press release over the weekend. The press release is a non-denial denial type issue, and doesn’t quite address what WSJ/FT had reported.

Instead it focuses on the current and future plans between two companies. Or did they? According to Randall L. Stephenson, AT&T Chief Operating Officer, “Great partnerships must continuously work together to adapt to changing market conditions and changing strategies.” Oh, this one is going to get really interesting. If you got any juicy tidbits, send them our way.

Original post is below the fold.

For five years it has been a perfect marriage: AT&T’s DSL offering layered with Yahoo’s consumer-friendly services. Yahoo provided SBC (now AT&T) with what it has never been able to figure out: how to make consumers happy! SBC provided networks, which meant Yahoo didn’t have to worry about the pipes.

Well, like all too-good-to-be-true marriages, the two partners are drifting apart, according to a report in The Financial Times (via MSNBC.) The companies are said to be in heated negotiations and AT&T wants better terms. They even considered buying Yahoo, as the Yahoo stock market capitalization declined in recent months.

“From 2001 to 2004, the companies that had the clout online were the Yahoos of the world,” said Scott Kessler, an analyst at Standard & Poor’s. “Now [telecoms] companies have millions of broadband subscribers. Frankly, they need to rely considerably less on Yahoo to acquire customers.”

I told you so. (Sorry mom, I know gloating is a sin!) This is from an earlier post, which pretty much outlined the breakup scenario, and I would say that AT&T wouldn’t be the last carrier to renegotiate with Yahoo.

The past, it seems has been perfect for these two partners, but deep down the future has to be tense. If you start stripping away the layers, it is Yahoo, which has an ongoing relationship with the consumers. When a person switches from AT&T DSL, the relationship goes with Yahoo.

A senior executive at one of Yahoo’s other phone company partners expressed big concern over this end-relationship, and posited that in the end it would become a thorn in their side. Of course there is the other option – AT&T buying Yahoo! Stranger things have happened!

Andy Abramson has a pretty outrageous theory, which is actually not such a bad idea.

With AOL being carved up like scrap metal these days it would not be out of the realm of possibility that Time Warner and AT&T find a way to put some of AOL over with AT&T.

That would be too funny. Time Warner could seriously hobble AT&T by passing the buck.

Since its all conjecture, it is hard to say how it will end. However, it does reinforce one well-known notion: phone companies are no one’s friend, at least not over the long term. After all they don’t even love the folks who pay the bills, aka the consumers.