Yahoo can make up any shortfalls if AT&T partnership is changed

Yahoo Inc. (NASDAQ:YHOO) will be able to make up any shortfall that occurs if there is a major change to its nearly six-year-old Internet access selling partnership with AT&T Inc. (NYSE:T)

AT&T now wants to only give Yahoo a cut of the revenue from the services the Internet portal sells such as music instead of giving a percentage of sales from the broadband business, according to the Wall Street Journal.

Yahoo gets about $200 million to $250 million in revenue from the partnership a small fraction of the $5 billion to $5.5 billion analysts expect the Internet company to earn this year, the paper says, adding that the fees from AT&T were very profitable for Yahoo.

If this happens, it would of course be a setback though hardly a disaster, I don't think its partnership with AT&T, which expires next year, will totally end. The two companies still need each other though not in the ways that the deal was originally structured. There remain plenty of reasons to like Yahoo otherwise.

Yahoo will get a bump from Project Panama. Advertisers don't like putting all of their eggs in one basket in search even if that basket is Google Inc. (NASDAQ:GOOG). Let's not forget that more and more advertising is coming online and that the Yahoo portal is still hugely popular though YouTube and niche sites continue to pose a serious threat.

Interestingly, the paper said that AT&T has raised the possibility of a merger with Yahoo and that Yahoo rebuffed the idea. I wouldn't be surprised if that idea is raised again in the current discussions about the partnership.