Shares in internet search engine firm LookSmart plunged by 58% on Monday after Microsoft said it was ending its contract with the firm.
The news hit Nasdaq-listed LookSmart hard because the firm gets nearly 70% of its sales from Microsoft.
Microsoft has decided to end its licensing arrangement because it intends to develop its own internet search technology.
“We’re going to need to make some changes around here,” said Jason Kellerman, chief executive of San Francisco based LookSmart.
LookSmart’s reliance on Microsoft, which has been a customer since 1998, leaves it urgently needing new clients.
By developing its own internet search software, Microsoft is hoping to tap into the lucrative promotions market, analysts say.
Companies are willing to pay hefty sums of money to search engines to have click-through to their advertising or sites appear prominently in internet searches on related topics.
Microsoft is to end its contract with LookSmart from January 2004.
LookSmart had forecast sales of $147m for 2003, a forecast it was sticking to on Monday.