Yahoo 2003 Annual Report Download - page 38

properties, research and development expenses, and other The increases are attributable to approximately $14 mil-
operating costs. lion of increases in compensation related expense and
incremental general and administrative expenses, and
Product development expenses for the year ended Decem- approximately $13 million of increases in incremental
ber 31, 2003, increased approximately $66 million, or costs related to our 2002 acquisitions. General and
46 percent, as compared to the prior year. Product devel- administrative expenses as a percentage of sales remained
opment expenses increased by approximately $35 million relatively consistent in 2003 compared with 2002 and
due to incremental costs related to acquisitions completed 2001.
in 2003. The remainder of the increase was due to
approximately $38 million of increases in our total com- We currently believe that general and administrative
pensation expense related to engineers that develop and expenses in absolute dollars will increase in 2004 com-
enhance properties and services throughout the Yahoo! pared to 2003, as the company continues to grow, and we
network. Product development expenses for the year expect to incur incremental costs in 2004 related to acqui-
ended December 31, 2002, increased approximately sitions completed in 2003.
$20 million, or 17 percent, as compared to the prior year.
Stock Compensation. Stock compensation expense relates to
Product development expenses increased by approximately
the amortization of the intrinsic value of Yahoo! stock
$12 million due to incremental costs related to our 2002
options issued in connection with acquisitions we have
acquisitions, as well as overall increases of approximately
completed and other equity-based awards. This expense is
$7 million in our total compensation expense related to
being recorded using an accelerated amortization method.
engineers that develop and enhance properties and services
throughout the Yahoo! network. Product development Stock compensation expense for the year ended Decem-
expenses in 2003, 2002 and 2001 as a percentage of reve- ber 31, 2003, was approximately $22 million, an increase
nues were 13 percent, 15 percent and 17 percent, respec- of approximately $14 million, or 162 percent, as com-
tively, and decreased as a result of the overall increase in pared to the prior year. Stock compensation expense
revenues, and savings as a result of our overall effort to increased in connection with the acquisitions completed in
manage discretionary costs. 2003. Stock compensation expense for the year ended
December 31, 2002, was approximately $8 million, com-
We believe that continued investments in product devel-
pared to approximately $9 million for the year ended
opment are required to remain competitive, and we will
December 31, 2001. Stock compensation expense is allo-
incur incremental costs in 2004 related to acquisitions
cated as follows (in thousands):
completed in 2003. Consequently, we currently anticipate
that product development costs in absolute dollars will
Years Ended December 31,
increase in 2004 compared to 2003.
2001 2002 2003
General and Administrative. General and administrative Sales and marketing $3,090 $1,424 $ 5,785
expenses consist primarily of compensation related Product development 4,615 1,702 10,526
expenses and fees for professional services. General and administrative 1,391 5,276 5,718
Total stock compensation expense $9,096 $8,402 $22,029
General and administrative expenses for the year ended
December 31, 2003, increased approximately $56 million,
or 56 percent, as compared to the prior year. General and We currently believe that stock compensation expenses in
administrative expenses increased by approximately absolute dollars will increase in 2004 compared to 2003.
$17 million due to incremental costs related to acquisi-
tions completed in 2003. The remainder of the increase
was primarily due to approximately $19 million of
increases in professional services expenses and approxi-
mately $12 million of increased compensation-related
expenses. General and administrative expenses for the year
ended December 31, 2002, increased approximately
$23 million, or 29 percent, as compared to the prior year.
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