Babylon Drops Most Ever as Revenue Hurt Amid Yahoo! Discord

Babylon Ltd. dropped the most on record and trading surged after the Israeli translation-software maker said a reduction in investments amid a dispute with Yahoo! Inc. will hurt revenue.

The stock plunged 18 percent, the biggest decline since February 2007 when the shares were listed in Tel Aviv, to 19.70 shekels at the close in Israel. Babylon has tumbled 23 percent since the Or Yehuda, Israel-based company said Oct. 20 that Yahoo may suspend a four-year contract if deficiencies in the implementation weren’t corrected. Trading was more than five times the 3-month average daily volume.

Babylon is working with Yahoo to identify and fix collaboration issues, it said today. The company has “significantly” cut its investment in new users, which will lower revenues, as a precautionary measure, according to a filing to the stock exchange.

“The announcement indicates the deal with Yahoo is on shaky ground,” Beni Dekel, an analyst at Union Bank of Israel Ltd., said by phone. “The business environment for Babylon has become very tough and this may hurt growth and profitability prospects.”

The shares advanced 134 percent last year after profit more than doubled compared to the previous year. Second-quarter profit jumped 75 percent to 40 million shekels, according to data compiled by Bloomberg. The partnership with Yahoo accounted for 32 percent of second-quarter revenue, according to a company presentation in July.

Babylon has been trying to expand its roster of revenue-sharing partners to reduce its dependence on Google Inc., which accounted for 43 percent of second-quarter revenue, according to the presentation.

Before it's here, it's on the Bloomberg Terminal.