Yahoo 2005 Annual Report Download - page 78

72
The amortizable intangible assets have useful lives of five years. No amount has been allocated to in-
process research and development and $208 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. Liabilities assumed included approximately $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, 2005, approximately $9 million remained related to excess
facilities.
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 of the Company and Overture 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
advertisements, text based 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 per share in cash, which amounted 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,
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 Yahoo! common stock was determined based on the average market price of the common stock over
the five 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.
The allocation of the purchase price to the assets acquired and liabilities assumed based on the fair values
was as follows (in thousands):
Cash acquired $ 160,673
Other tangible assets acquired 237,632
Amortizable intangible assets:
Customer, affiliate and advertiser related relationships 202,300
Developed technology and patents 134,300
Trade name, trademark and domain name 17,300
Goodwill 1,146,998
Total assets acquired 1,899,203
Liabilities assumed (234,798)
Deferred stock-based compensation 67,213
Total $ 1,731,618
The amortizable intangible assets have useful lives not exceeding five years and a weighted average useful
life of approximately 4 years. No amount has been allocated to in-process research and development and
$1.1 billion 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. Other
tangible assets acquired of approximately $238 million included long-term prepaid traffic acquisition costs
paid by Overture to Yahoo! of $30 million. Liabilities assumed of approximately $235 million included a
current liability for traffic acquisition costs owed by Overture to Yahoo! of $28 million. Liabilities assumed
included approximately $26 million of restructuring costs associated with the acquisition, $18 million of