New York - DivX (NASD: DIVX), a developer of video compression technology, has filed suit against Yahoo (NASD: YHOO) alleging breach of an advertising deal between the companies, Reuters reported.

San Diego-based DivX said Yahoo now wants to end a two-year deal struck in September 2007, despite the fact that the company has fulfilled its obligations under the agreement.

DivX added that Yahoo's termination of the deal will hurt its bottom line for fiscal 2008 and 2009; the company now expected 2008 earnings of 49 cents to 51 cents a share, compared with an earlier projection of 58 cents to 60 cents a share.

"Yahoo is disappointed with DivX's decision to pursue legal action rather than renegotiate this agreement," a company spokesman told Reuters.

"We intend to vigorously defend ourselves in court, but will reserve further comment until we've had an opportunity to review the suit."

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http://tech.yahoo.com/news/nm/20081118/tc_nm/us_divx_1

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