DivX says it settled lawsuit with Yahoo, raises third-quarter earnings outlook

DivX says it has settled lawsuit with Yahoo

SAN DIEGO — Video technology company DivX Inc. said Wednesday it has settled a lawsuit over a license and distribution deal with Yahoo, and raised its financial outlook for the third quarter.

The company said it will book a 17-cent gain on the settlement which will boost third-quarter earnings per share to between 10 and 12 cents, compared with an Aug. 4 estimate for a loss of 6 cents to 8 cents per share.

Excluding one-time items, DivX said it still expects to break even or post a loss of up to 2 cents per share. On that basis, analysts surveyed by Thomson Reuters expect a break-even quarter.

DivX makes video technology used on personal computers, televisions and mobile devices. Its shares rose 17 cents, or 3 percent, to $5.60 after news of the settlement with Yahoo was released. They closed earlier up 27 cents at $5.43.

San Diego-based DivX had sued Yahoo after saying the Internet search engine company wouldn’t honor a two-year deal on toolbar distribution reached in September 2007. DivX Chief Financial Officer Dan Halvorson said the company is pleased to have the dispute behind it.

DivX didn’t disclose the dollar amount of the settlement. But it said it based its new earnings outlook on the settlement increasing operating income by 29 cents per share. The company has about 32.8 million shares outstanding, implying a benefit of about $9.5 million.

After taxes, the benefit will total about 17 cents per share, the company said.