Yahoo 2003 Annual Report Download - page 26

adopted, and certain proposals, if adopted, could materi- content by virtue of our involvement in marketing, brand-
ally and adversely affect our business through a decrease ing, broadcasting or providing access to them, even if we
in user registrations and revenues. This could be caused do not ourselves host, operate, provide, or provide access
by, among other possible provisions, the required use of to these products, services or content. While our agree-
disclaimers or other requirements before users can utilize ments with these parties often provide that we will be
our services. indemnified against such liabilities, such indemnification
may not be adequate.
Due to the nature of the Web, it is possible that the
governments of other states and foreign countries might It is also possible that, if any information provided
attempt to regulate Web transmissions or prosecute us for directly by us contains errors or is otherwise negligently
violations of their laws. We might unintentionally violate provided to users, third parties could make claims against
such laws, such laws may be modified and new laws may us. For example, we offer Web-based email services, which
be enacted in the future. Any such developments (or expose us to potential risks, such as liabilities or claims
developments stemming from enactment or modification resulting from unsolicited email, lost or misdirected
of other laws) could increase the costs of regulatory com- messages, illegal or fraudulent use of email, or interrup-
pliance for us or force us to change our business practices. tions or delays in email service. Investigating and defend-
ing any of these types of claims is expensive, even to the
We may be subject to legal liability for online services.
extent that the claims do not ultimately result in liability.
We host a wide variety of services that enable individuals
We issued $750 million of zero coupon senior convertible
to exchange information, generate content, conduct busi-
notes due April 2008 which we may not be able to repay in
ness and engage in various online activities on an interna-
cash and could result in dilution of our earnings per share.
tional basis, including public message posting and services In April 2003, we issued $750 million of zero coupon
relating to online auctions and homesteading. The law senior convertible notes due April 1, 2008. The notes are
relating to the liability of providers of these online services convertible into our common stock at a conversion price
for activities of their users is currently unsettled both of $41.00 per share, which would result in the issuance of
within the United States and abroad. Claims have been an aggregate of 18 million shares, subject to adjustment
threatened and have been brought against us for defama- upon the occurrence of specified events. Therefore, each
tion, negligence, copyright or trademark infringement, $1,000 principal amount of the notes will initially be con-
unlawful activity, tort, including personal injury, fraud, or vertible into 24.3902 shares of our common stock prior
other theories based on the nature and content of infor- to April 1, 2008 if the sale price of our common stock
mation that we provide links to or that may be posted issuable upon conversion of the notes reaches a specified
online or generated by our users or with respect to auc- threshold or specified corporate transactions have
tioned materials. In addition, Yahoo! was the subject of a occurred. The specified thresholds for conversion prior to
claim brought by certain entities in a French court regard- the maturity date are (1) the closing sale price of our
ing, among other things, the availability of certain content common stock for at least 20 trading days in the 30
within our services which was alleged to violate French trading-day period ending on the last trading day of the
law. Due to the unsettled nature of the law in this area, immediately preceding fiscal quarter exceeds 110 percent
we may be subject to similar actions in domestic or other of the conversion price in effect on that 30th trading day,
international jurisdictions in the future. Our defense of and (2) during the period beginning January 1, 2008
any such actions could be costly and involve significant through the maturity date, the closing sale price of our
distraction of our management and other resources. In common stock on the previous trading day was 110 per-
addition, we are aware that governmental agencies are cur- cent or more of the then current conversion price. We
rently investigating the conduct of online auctions. may be required to repurchase all of the notes at face
value following a fundamental change of the Company,
We also periodically enter into arrangements to offer
such as a change of control, prior to maturity. Following a
third-party products, services, or content under the Yahoo!
fundamental change of the Company, we may choose to
brand or via distribution on various Yahoo! properties,
pay the purchase price of the notes in cash, shares of our
including stock quotes and trading information. We may
common stock, shares of common stock of the surviving
be subject to claims concerning these products, services or
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