Yahoo 2003 Annual Report Download - page 66

price over the fair value of the net tangible and intangible annually. The preliminary purchase price allocation for
assets acquired, and is not deductible for tax purposes. Inktomi is subject to revision as more detailed analysis is
completed and additional information on the fair value of
Inktomi. On March 19, 2003, Yahoo! completed the acqui- assets and liabilities becomes available. Any change in the
sition of Inktomi, a provider of Web search and paid fair value of the net assets of Inktomi will change the
inclusion services on the Internet. The acquisition com- amount of the purchase price allocable to goodwill. Liabil-
bined Yahoo!’s global audience and Inktomi’s search tech- ities assumed included approximately $23 million of
nology to allow the Company to create a more relevant, restructuring costs associated with the acquisition, approxi-
comprehensive and higher quality search offering on the mately $6 million of which related to workforce reduction
Web. These factors contributed to a purchase price in and the remainder related to excess facilities. As of
excess of the fair value of the Inktomi net tangible and December 31, 2003, approximately $17 million remains
intangible assets acquired, and as a result, the Company related to excess facilities. This amount includes estimated
has recorded goodwill in connection with this transaction. sub-lease income based on current comparable rates for
leases in the respective markets. If facilities rental rates
The total estimated purchase price of approximately continue to decrease in these markets or if it takes longer
$290 million consisted of approximately $273 million in than expected to sublease these facilities, the maximum
cash consideration, approximately $14 million related to amount the actual loss could exceed the original estimate
one million stock options exchanged, and direct transac- is approximately $2 million.
tion costs of approximately $3 million. The $273 million
of total cash consideration less cash acquired of approxi- Overture. On October 7, 2003, Yahoo! completed the
mately $45 million resulted in a net cash outlay of acquisition of Overture, a provider of commercial search
approximately $228 million. The value of the stock services on the Internet including pay-for-performance
options was determined using the Black-Scholes option search services. Yahoo! believes that the combined assets
valuation model. will further position it as a leader in the Internet advertis-
ing sector. Together, the two companies will be able to
The preliminary allocation of the purchase price to the provide a diversified suite of integrated marketing solu-
assets acquired and liabilities assumed based on the esti- tions, including branding, paid placement, graphical ads,
mated fair values was as follows (in thousands): text-links, multimedia, and contextual advertising. These
factors contributed to a purchase price in excess of the fair
Cash acquired $ 44,610 market value of the net tangible and intangible assets
Other tangible assets acquired 27,537 acquired from Overture, and as a result, the Company has
Amortizable intangible assets recorded goodwill in connection with this transaction.
Existing technology and patents 25,900
Customer contracts and related relationships 23,500 Under the terms of the acquisition agreement, each out-
Goodwill 217,119 standing share of Overture was exchanged for 0.6108
shares of Yahoo! common stock, representing approxi-
Total assets acquired 338,666
mately 40 million shares valued at approximately $1.3 bil-
Liabilities assumed (50,347) lion, and $4.75 in cash, which amounts to approximately
Deferred stock-based compensation 1,287 $309 million in aggregate cash, and together with approx-
Total $289,606 imately $136 million related to 10 million stock options
exchanged and direct transaction costs of approximately
$10 million resulted in an aggregate purchase price of
Amortizable intangible assets consist of customer-related approximately $1.7 billion. The $309 million of total cash
intangible assets and developed technology with useful consideration less cash acquired of approximately
lives not exceeding five years. A preliminary estimate of $161 million resulted in a net cash outlay of approxi-
$217 million has been allocated to goodwill. Goodwill mately $148 million. The value of the common stock was
represents the excess of the purchase price over the fair determined based on the average market price of the com-
value of the net tangible and intangible assets acquired, mon stock over the 5-day period surrounding the date the
and is not deductible for tax purposes. Goodwill will not acquisition was announced in July 2003. The value of the
be amortized and will be tested for impairment, at least
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