Yahoo 2004 Annual Report Download - page 70

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consideration less cash acquired of approximately $45 million resulted in a net cash outlay of $228 million. The value of
the stock options was determined using the Black-Scholes option valuation model.
The allocation of the purchase price to the assets acquired and liabilities assumed based on the estimated fair values was
as follows (in thousands):
Cash acquired $ 44,610
Other tangible assets acquired 27,522
Amortizable intangible assets
Existing technology and patents 25,900
Customer contracts and related relationships 23,500
Goodwill 217,425
Total assets acquired 338,957
Liabilities assumed (50,638)
Deferred stock-based compensation 1,287
Total $289,606
The amortizable intangible assets have useful lives not exceeding five years. No amount has been allocated to in-process
research and development. Goodwill of $217 million represents the excess of the purchase price over the fair value of the
net tangible and intangible assets acquired, and is not deductible for tax purposes. Liabilities assumed included approxi-
mately $23 million of restructuring costs associated with the acquisition, $6 million of which related to workforce
reduction and the remainder related to excess facilities. As of December 31, 2004, approximately $12 million remains
related to excess facilities. This amount includes estimated sub-lease income based on current comparable rates for leases
in the respective markets. If facilities rental rates continue to decrease in these markets or if it takes longer than expected
to sublease these facilities, the maximum amount the actual loss could exceed the original estimate is approximately
$2 million.
Overture. On October 7, 2003, the Company completed the acquisition of Overture Services, Inc. (‘‘Overture’’), a provider
of commercial search services on the Internet, including sponsored search services. The Company believed that the
combined assets would further position it as a leader in the Internet advertising sector. Together, the two companies
would be able to provide a diversified suite of integrated marketing solutions, including branding, paid placement,
graphical ads, text-links, multimedia, and contextual advertising. These factors contributed to a purchase price in excess
of the fair market value of the net tangible and intangible assets acquired from Overture, and as a result, the Company
has recorded goodwill in connection with this transaction.
Under the terms of the acquisition agreement, each outstanding share of Overture was exchanged for 1.2216 shares of
Yahoo! common stock, representing approximately 79 million shares valued at $1.3 billion, and $4.75 in cash, which
amounts to $309 million in aggregate cash, and together with $136 million related to 19 million stock options
exchanged and direct transaction costs of $10 million which resulted in an aggregate purchase price of $1.7 billion. The
approximate $309 million of total cash consideration less cash acquired of $161 million resulted in a net cash outlay of
$148 million. The value of the common stock was determined based on the average market price of the common stock
over the 5-day period surrounding the date the acquisition was announced in July 2003. The value of the stock options
was determined using the Black-Scholes option valuation model.
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