Yahoo 2004 Annual Report Download - page 72

Acquisitions completed in 2004
3721. On January 2, 2004, the Company completed the acquisition of all of the outstanding capital shares of 3721
Network Software Company Limited (‘‘3721’’), a Hong Kong-based software development company. The acquisition
combined the Company’s global audience and 3721’s keyword search technology to enable the Company to continue
improving its global search services. These factors contributed to a purchase price in excess of the fair value of 3721’s net
tangible and intangible assets acquired, and as a result, the Company has recorded goodwill in connection with this
transaction.
The total purchase price of approximately $74 million consisted of $51 million in cash consideration, $2 million related
to stock options exchanged, direct transaction costs of $1 million and $20 million related to a contingent earnout that
will be paid in 2005. The total cash consideration of approximately $51 million less cash acquired of approximately
$7 million resulted in an initial net cash outlay of $44 million.
Under the terms of the acquisition, the Company has contingently agreed to pay an additional amount of cash up to a
maximum of $35 million per year for two years ending December 31, 2005. The total maximum of $70 million in cash,
part of which will be an increase to the purchase price and the remainder will be operating expense, over the two-year
period ending December 31, 2005, if certain performance criteria are met. At December 31, 2004, the Company
recorded an additional $20 million of purchase price and $3 million of additional operating expense, as 3721 achieved
certain performance-based milestones. As of December 31, 2004, these amounts were included in accrued expenses and
other current liabilities and will be paid in 2005.
The allocation of the purchase price, excluding the remaining contingent payment, to the assets acquired and liabilities
assumed based on the estimated fair values was as follows (in thousands):
Cash acquired $ 6,917
Other tangible assets acquired 4,498
Amortizable intangible assets
Trade name, trademark, and domain name 1,000
Customer, affiliate, and advertiser related relationships 7,600
Developed technology and patents 3,800
Goodwill 59,397
Total assets acquired 83,212
Liabilities assumed (11,186)
Deferred stock-based compensation 1,757
Total $ 73,783
The amortizable intangible assets have useful lives not exceeding five years. No amount has been allocated to in-process
research and development, and approximately $59 million has been allocated to goodwill. Goodwill 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.
Kelkoo. On April 5, 2004, the Company completed the acquisition of a majority interest in Kelkoo S.A. (‘‘Kelkoo’’), a
leading European online comparison shopping service. In July 2004, the Company completed the acquisition of addi-
tional interests in Kelkoo, increasing the Company’s total ownership interest in Kelkoo to 100 percent. The acquisition
expanded the Company’s global commerce presence and together with the Company’s current services is expected to
increase the Company’s competitive position in Europe. These factors contributed to a purchase price in excess of the fair
value of Kelkoo’s net tangible and intangible assets acquired, and as a result, the Company has recorded goodwill in
connection with this transaction.
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