Like the Lord, AT&T giveth and AT&T taketh away.
Three years after signing a major web portal services contract with Synacor Inc, AT&T is now dropping the company in favor of another, undisclosed vendor, potentially creating a big revenue shortfall for Synacor.
Synacor announced late Thursday that it "plans to begin discussions with AT&T regarding a wind-down and user-migration plan" for the ATT.net portal. The announcement came after AT&T notified Synacor that it intends to select another portal provider for the site.
ATT.net accounted for $9.3 million in revenue, or nearly half of the $20.7 million in revenue generated by the Buffalo, N.Y. tech company's portal and advertising segment during the first quarter. Overall, Synacor generated about $102 million in revenue last year, including $53.3 million from portal and advertising contracts like the one with AT&T.
Despite this significant loss, Synacor officials expressed optimism that the company will not suffer greatly. In fact, pointing out that the wind-down and migration plan will take many months to execute and will be subject to mutual agreement between AT&T and Synacor, they maintained their financial guidance for both the second quarter and the full year. In May, the company said it expected to produce $31 million to $33 million in Q2 revenue and $137 million to $145 million in revenue for all of 2019, with net losses in both periods.
"Synacor is a $100 million-plus revenue business without the AT&T portal, and we have never been more excited about the significant opportunities in our $49 million high-margin, recurring-revenue-driven enterprise software business," Synacor CEO Himesh Bhise said in a prepared statement. "While we were optimistic regarding the strength of our renewal proposals as well as our accomplishments for ATT.net, we have been actively managing the Synacor business to prepare for any outcome and have remained focused on our high-growth products and services."
Synacor made the announcement yesterday after the closure of Nasdaq. After sliding 11% in after-hours trading last night, the company's stock edged climbed back up to 1.53 in early-morning trading today.
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— Alan Breznick, Cable/Video Practice Leader, Light Reading