Yahoo 2003 Annual Report Download - page 17

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may have greater operational, strategic, financial, personnel • in the case of 3721, uncertainty regarding foreign
or other resources than we do, as well as greater brand laws and regulations; and
recognition. These competitors compete against Overture
• the potential unknown liabilities associated with
for affiliate arrangements and could cause Overture to
the acquired companies.
enter into affiliate arrangements with less favorable terms,
lose current affiliates or not acquire new affiliates, which We may experience similar risks in connection with our
could reduce the number of click-throughs, increase the future acquisitions. We may not be successful in address-
amount of revenue shared with affiliates, and reduce total ing these risks or any other problems encountered in con-
revenues and thereby harm our business, operating results nection with the acquisitions of Overture, Inktomi and
and financial condition. 3721 or that we could encounter in future acquisitions,
Acquisitions could result in operating difficulties.
which would harm our business or cause us to fail to
realize the anticipated benefits of our acquisitions.
As part of our business strategy, we acquired Inktomi in
March 2003, Overture in October 2003, 3721 Network
We may be subject to intellectual property infringement
Software Company Limited (‘‘3721’’) in January 2004,
claims, which are costly to defend and could limit our ability
and have completed several other acquisitions since incep-
to provide certain content or use certain technologies in the
tion. We expect to enter into additional business combi-
future.
nations and acquisitions in the future. Acquisitions may Many parties are actively developing search, indexing,
result in dilutive issuances of equity securities, use of our electronic commerce and other Web-related technologies,
cash resources, incurrence of debt and amortization of as well as a variety of online business models and meth-
expenses related to intangible assets. The acquisitions of ods. We believe that these parties will continue to take
Inktomi, Overture and 3721 were accompanied by a steps to protect these technologies, including, but not lim-
number of risks, including: ited to, seeking patent protection. As a result, disputes
regarding the ownership of these technologies and rights
• the difficulty of assimilating the operations and associated with online business are likely to arise in the
personnel of Overture, which are principally future. In addition to existing patents and intellectual
located in Southern California, with and into property rights, we anticipate that additional third-party
Yahoo!’s operations, which are headquartered in patents related to our services will be issued in the future.
Northern California; From time to time, parties assert patent infringement
claims against us in the form of letters, lawsuits and other
• the potential disruption of our ongoing business forms of communications. Currently, we are engaged in
and distraction of management; several lawsuits regarding patent issues and have been
notified of a number of other potential disputes. We
• the difficulty of incorporating acquired technology expect that we will increasingly be subject to patent litiga-
and rights into our products and unanticipated tion as our services expand.
expenses related to such integration;
In addition to patent claims, third parties have asserted
• the failure to further successfully develop acquired and most likely will continue to assert claims against us
technology resulting in the impairment of amounts alleging infringement of copyrights, trademark rights,
currently capitalized as intangible assets; trade secret rights or other proprietary rights, or alleging
unfair competition or violations of privacy rights. Cur-
• the impairment of relationships with customers of
rently, our subsidiary LAUNCH Media, Inc.
the acquired companies or our own customers as a
(‘‘LAUNCH’’) is engaged in a lawsuit regarding copyright
result of any integration of operations;
issues that commenced prior to our acquisition of
• the impairment of relationships with employees of LAUNCH. In addition, Overture is in litigation with sev-
the acquired companies or our own business as a eral companies, each of which has claimed that allowing
result of any integration of new management advertisers to bid on certain search terms constitutes
personnel; trademark infringement.
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