Yahoo 2003 Annual Report Download - page 42

options was determined using the Black-Scholes option Internet, including pay-for-performance search services.
valuation model. Yahoo! believes that the combined assets will further posi-
tion it as a leader in the Internet advertising sector.
The preliminary allocation of the purchase price to the Together, the two companies will be able to provide a
assets acquired and liabilities assumed based on the esti- diversified suite of integrated marketing solutions, includ-
mated fair values was as follows (in thousands): ing branding, paid placement, graphical ads, text-links,
multimedia, and contextual advertising. These factors con-
Cash acquired $ 44,610 tributed to a purchase price in excess of the fair market
Other tangible assets acquired 27,537 value of the net tangible and intangible assets acquired
Amortizable intangible assets from Overture, and as a result, the Company has recorded
Existing technology and patents 25,900 approximately $1.2 billion of goodwill in connection with
Customer contracts and related relationships 23,500 this transaction. See Note 12 – ‘‘Segments’’ for informa-
Goodwill 217,119 tion related to revenues generated from the Company’s
agreement with Overture.
Total assets acquired 338,666
Liabilities assumed (50,347)
Under the terms of the acquisition agreement, each out-
Deferred stock-based compensation 1,287
standing share of Overture was exchanged for 0.6108
shares of Yahoo! common stock, representing approxi-
Total $289,606
mately 40 million shares valued at approximately $1.3 bil-
lion, and $4.75 in cash, which amounts to approximately
Amortizable intangible assets consist of customer-related $309 million in aggregate cash, and together with approx-
intangible assets and developed technology with useful imately $136 million related to approximately 10 million
lives not exceeding five years. A preliminary estimate of stock options exchanged and direct transaction costs of
approximately $217 million has been allocated to good- approximately $10 million resulted in an aggregate pur-
will. Goodwill represents the excess of the purchase price chase price of approximately $1.7 billion. The $309 mil-
over the fair value of the net tangible and intangible assets lion of total cash consideration less cash acquired of
acquired, and is not deductible for tax purposes. Goodwill approximately $161 million resulted in a net cash outlay
will not be amortized and will be tested for impairment, of approximately $148 million. The value of the common
at least annually. The preliminary purchase price allocation stock was determined based on the average market price
for Inktomi is subject to revision as more detailed analysis of the common stock over the 5-day period surrounding
is completed and additional information on the fair value the date the acquisition was announced in July 2003. The
of assets and liabilities becomes available. Any change in value of the stock options was determined using the
the fair value of the net assets of Inktomi will change the Black-Scholes option valuation model.
amount of the purchase price allocable to goodwill. Liabil-
ities assumed included approximately $23 million of The preliminary allocation of the purchase price to the
restructuring costs associated with the acquisition, approxi- assets acquired and liabilities assumed based on the esti-
mately $6 million of which related to workforce reduction mated fair values was as follows (in thousands):
and the remainder related to excess facilities. As of
December 31, 2003, approximately $17 million remains Cash acquired $ 160,673
Other tangible assets acquired 218,308
related to excess facilities. This amount includes estimated
Amortizable intangible assets
sub-lease income based on current comparable rates for
Existing technology and patents 134,300
leases in the respective markets. If facilities rental rates
Affiliate and advertiser contracts and related relationships 202,300
continue to decrease in these markets or if it takes longer
Trade name, trademark, and domain name 17,300
than expected to sublease these facilities, the maximum
Goodwill 1,166,620
amount the actual loss could exceed the original estimate
Total assets acquired 1,899,501
is approximately $2 million.
Liabilities assumed (240,952)
Deferred stock-based compensation 74,588
Overture
Total $1,733,137
On October 7, 2003, Yahoo! completed the acquisition of
Overture, a provider of commercial search services on the
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