SAN FRANCISCO - Overture Services may rank as the ultimate case study of why a company should never be overly dependent on one or two customers.

You're at their mercy, in other words, or they can ultimately squeeze you out.

Just the very whiff of losing Microsoft as a customer sent shares of the pay-for-performance search engine down as much as 23 percent on Wednesday, after SoundView Technology analyst Jordan Rohan speculated on such a parting of ways.

In recent trading, Overture traded down 18 percent to $12.43.

Pasadena, Calif.-based Overture's flat denial of any change in its multi-year relationship with the software giant didn't fall entirely on deaf ears.

"We believe SoundView's report is simply wrong. The fact is that we have a strong and growing relationship with Microsoft, which was demonstrated earlier this week with a new search agreement in Korea," said Al Duncan, Overture spokesperson.

Microsoft, which accounted for a third of Overture's fourth-quarter sales, was not immediately available to comment.

In Rohan's note to clients, he said that Microsoft is "significantly increasingly its investment in search, preparing to pursue its own paid-search platform...

"We have confirmed this strategic shift with multiple sources within Microsoft, which is essentially more than tripling its existing search team from its current headcount of nearly 70," he said.

Rohan also said that Microsoft CEO Steve Ballmer had discussed the strategy last week, while changes were highlighted in an internal memo.

Accordingly, Rohan downgraded Overture and slapped a $6 price target on the shares, but it certainly wasn't the only casualty in the market. and moved in sympathy, falling sharply.'s shares have attracted buyers of late, partly on optimism that the tiny paid-listing company might be snapped up by a large portal. As for, Microsoft also generates a significant portion of its sales.

Microsoft beacon

Microsoft and Overture have had in place an agreement over the last several years, but the MSN "search pane" contract ends this year and the site agreement ends in 2004.

The relationship has kept Overture on solid ground as investors have speculated countless times on the status of the company's relationship with its other major customer, Yahoo.

In the last month, Overture shares have experienced turbulence.

For starters, they were clipped as market speculation surfaced that Yahoo was in talks to buy E-Spotting, Overture's European-based rival. The international market is clearly the area of growth for Overture.

So, in the last few months, Overture has spent its cash and stock to buy algorithmic search companies in hopes of expanding its relationship with Microsoft and other clients by offering paid-inclusion search.

Yet in mid-February, a securities filing revealed that Microsoft extended its relationship with search company Inktomi for paid-inclusion search. Overture's shares fell 2 percent on that news.