Yahoo 2005 Annual Report Download - page 82

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76
The amortizable intangible assets have useful lives not exceeding five years and a weighted average life of
approximately 4 years. No amount has been allocated to in-process research and development and
$388 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.
Other Acquisitions — Business Combinations. During the year ended December 31, 2005, the Company
acquired four other companies which were accounted for as business combinations. The total purchase for
these four acquisitions was approximately $79 million and consisted of $73 million in cash consideration,
$3 million related to stock options exchanged and $3 million of direct transaction costs. The total cash
consideration of $73 million less cash acquired of $3 million resulted in net cash outlay of $70 million. Of
the purchase price, $58 million was allocated to goodwill, $32 million to amortizable intangible assets and
$11 million to net assumed liabilities. Approximately $1 million was allocated to in-process research and
development and expensed in the consolidated statements of operations. 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.
The purchase price allocations for these acquisitions are preliminary and subject to revision as more
detailed analyses are completed and additional information on the fair value of assets and liabilities
becomes available. Any change in the fair value of the net assets of the acquired companies will change
the amount of the purchase price allocable to goodwill.
In each of the three years ended December 31, 2005 the Company also completed immaterial asset
acquisitions that did not qualify as business combinations.
Pro forma results of operations have not been presented for the acquisitions completed during the years
ended December 31, 2004 and 2005 as the results of the acquired companies, not already consolidated,
either individually or in the aggregate were not material to the Company’s financial results before the
acquisitions.
Note 4 INVESTMENTS IN EQUITY INTERESTS
As of December 31, Investments in equity interests consisted of the following (dollars in thousands):
2004 2005
Percent
Ownership
Alibaba $ — $ 1,408,716 46%
Yahoo! Japan 239,803 349,685 34%
Total $ 239,803 $ 1,758,401
Equity Investment in Alibaba. On October 23, 2005, the Company acquired approximately 46 percent of
the outstanding common stock of Alibaba, which represents approximately 40 percent on a fully diluted
basis, in exchange for $1.0 billion in cash, the contribution of the Company’s China based businesses,
including 3721 (“Yahoo China”) and direct transaction costs of $8 million. Pursuant to the terms of a
shareholder agreement, the Company has an approximate 35 percent voting interest in Alibaba, with the
remainder of its voting rights subject to a voting agreement with Alibaba management. Other investors in
Alibaba include SOFTBANK.
Through this transaction, the Company has combined its leading search capabilities with Alibaba’s leading
online marketplace and online payment system and Alibaba’s strong local presence, expertise and vision in
the China market. These factors contributed to a purchase price in excess of the Company’s share of the
fair value of Alibaba’s net tangible and intangible assets acquired resulting in goodwill.
The purchase price was based on acquiring a 40 percent equity interest in Alibaba on a fully diluted basis.
The Company’s equity interest in Alibaba may be diluted from approximately 46 percent to 40 percent