Yahoo 2007 Annual Report Download

Download and view the complete annual report

Please find the complete 2007 Yahoo annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 156

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156

Table of contents

  • Page 1

  • Page 2

  • Page 3
    ...(Address of principal executive offices, including zip code) Registrant's telephone number, including area code: (408) 349-3300 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered Common stock, $.001 par value Rights to Purchase...

  • Page 4
    YAHOO! INC. Form 10-K Fiscal Year Ended December 31, 2007 INDEX ITEM Page PART I Business...Risk Factors ...Unresolved Staff Comments ...Properties ...Legal Proceedings ...Submission of Matters to a Vote of Security Holders ...PART II ITEM 5 Market for Registrant's Common Equity, Related ...

  • Page 5
    ...business by offering products or services to local audiences. Yahoo! has embarked on a transformation to meet the needs of our users, advertisers, publishers, and developers. From our original goal as a guide to the Web, our goal today is to build the most open, robust, and vibrant online ad network...

  • Page 6
    ... spent. Advertisers - Marketing Solutions and Tools • Acquired Right Media Inc. ("Right Media"), an online advertising exchange that is an integral piece of the Company's strategy to build the industry's leading advertising and publishing network. The acquisition is a key step in Yahoo!'s efforts...

  • Page 7
    ...deliver targeted advertising and transaction-based services on behalf of our advertisers and publishers. Yahoo! Toolbar is a free Web browser add-on that enables users to conveniently access Yahoo! Properties from anywhere on the Web and provides free security services to enhance the user experience...

  • Page 8
    ... contribution of user-generated content, including reviews, helpfulness ratings, comments, and photos. The "City Guides" page was developed to surface popular listings, events, and information in the user's local area. Yahoo! Local generates revenues from our advertisers and publishers by serving...

  • Page 9
    ...offer Yahoo! Mail Plus, a premium mail service providing a number of premium features, including access via e-mail applications such as Outlook, enhanced spam protection, additional attachment size capacity, and a display ad-free interface. In 2007, we released for general availability a new version...

  • Page 10
    ... narrow. The acquisition increases Yahoo!'s technological capabilities used to track a wide number of individual news topics. Yahoo! Finance provides a comprehensive set of financial resources that range from investment and company information to personal financial management tools. Free tools are...

  • Page 11
    ...2007, Yahoo! Music launched a free lyrics site on the Web allowing users to view selected lyrics, as well as new features such as local upcoming concert listings, increased personalization with audio and video playlists, exclusive content, and blogs from industry leaders. Yahoo! Movies and Yahoo! TV...

  • Page 12
    ...content to enhance the television viewing experience. Yahoo! Digital Home generates revenues primarily from search and display advertising. Yahoo! Desktop services make it easy for users to keep up-to-date on and to interact with their Yahoo! services and other Internet-based information on their PC...

  • Page 13
    ... by users. We also recognize revenues from the display of text based links to the Websites of our advertisers ("search advertising") which are placed on Yahoo! Properties and on Affiliate sites. We recognize revenues from these arrangements as "click-throughs" occur. Marketing services revenues also...

  • Page 14
    ... employers and staffing firms that pay to access our database of job seekers and use our tools to post, track, and manage job openings. Yahoo! Small Business provides a comprehensive and integrated suite of fee-based online services including Yahoo! Domains, Yahoo! Web Hosting, Yahoo! Business Mail...

  • Page 15
    ...-service program that enables advertisers to place targeted text-based links to their Websites on Yahoo! Properties as well as on our Affiliate sites. Our telesales channel focuses on sales of marketing services to small-and medium-sized businesses. We employ sales professionals in locations across...

  • Page 16
    ... of developers have used and built upon technology from Yahoo! services, including Yahoo! Search, Yahoo! Photos, and Yahoo! Maps to further increase the relevance of Yahoo! products and services for individual users and the greater community. Another example of this effort is the Hack Yahoo! Program...

  • Page 17
    ... is to explore and invent social media and mobile media technology and applications that will enable people to create, describe, share, find, and remix media on the Web. Our engineering and production teams are primarily located in our Sunnyvale, California headquarters and in Bangalore, India and...

  • Page 18
    ... services, desktop search, local search, instant messaging, photos, maps, video sharing, content channels, mobile applications, and shopping services. AOL has access to content from Time Warner's movie, television, music, book, periodical, news, sports, and other media holdings; access to a network...

  • Page 19
    ..., networks, Affiliates, and publishers; • the successful development and deployment of technology improvements to our advertising platform; • maintaining our Affiliate program for our search marketing; • deriving better demographic and other information from our users; and • driving...

  • Page 20
    ... of users and businesses that conduct searches and access our search marketing listings come from a limited number of sources in certain markets. In addition to Yahoo! Properties, sources for users are members of our Affiliate network, including portals, browsers and other Affiliates. Our agreements...

  • Page 21
    ..., such as news items, stock quotes, weather reports, maps and audio and video content from third parties. We have been providing increasing amounts of audio and video content to our users, and we believe that users will increasingly demand high-quality audio and video content, such as music, film...

  • Page 22
    ... other businesses. If we are unable to license or acquire compelling content at reasonable prices, if other companies broadcast content that is similar to or the same as that provided by Yahoo!, or if we do not develop compelling editorial content or personalization services, the number of users of...

  • Page 23
    ... to issues such as user privacy and data protection, defamation, pricing, advertising, taxation, gambling, sweepstakes, promotions, billing, real estate, consumer protection, content regulation, quality of services, telecommunications, mobile and intellectual property ownership and infringement in...

  • Page 24
    ...to the collection, use, sharing or security of personal information or other privacyrelated matters could result in a loss of user confidence in us, damage to the Yahoo! brands, and ultimately in a loss of users, advertisers, or Affiliates which could adversely affect our business. A large number of...

  • Page 25
    ... develop and extend the Yahoo! brand, fund greater levels of product development, develop and commercialize additional media properties and premium services, and acquire and integrate complementary businesses and technologies. If our expenses continue to increase at a greater pace than our revenues...

  • Page 26
    ... limited experience or rely on business partners. We plan to expand Yahoo! branded online properties and search offerings in international markets. We have currently developed, through joint ventures, strategic investments, subsidiaries and branch offices, localized offerings in over 20 countries...

  • Page 27
    ..., services or content under the Yahoo! brand or via distribution on Yahoo! Properties, including stock quotes and trading information. We may be subject to claims concerning these products, services or content by virtue of our involvement in marketing, branding, broadcasting or providing access to...

  • Page 28
    ...technology advances or requirements of our users, advertisers and publishers. As one of the most highly trafficked Websites on the Internet, Yahoo! delivers a growing number of products, services and page views to an increasing number of users around the world. In addition, the products and services...

  • Page 29
    ... execute our business plan. In addition to our relationships with Internet access providers, we have certain distribution agreements and informal relationships with operators of online networks and leading Websites, software companies, electronics companies, and computer manufacturers to increase...

  • Page 30
    ... our business, we have distributed and intend to continue distributing our servers among additional data centers located around the world. Failure to execute these changes properly or in a timely manner could result in delays or interruptions to our service, which could result in a loss of users and...

  • Page 31
    ... we have an equity investment, including Yahoo! Japan and Alibaba Group Holding Limited; and news reports relating to trends in our markets or general economic conditions. In addition, the stock market in general, and the market prices for Internet-related companies in particular, have experienced...

  • Page 32
    ... and other intellectual property rights, claims related to employment matters, and a variety of other claims, including claims alleging defamation, invasion of privacy, or similar claims arising in connection with our e-mail, message boards, auction sites, shopping services and other communications...

  • Page 33
    ..., among other things, violation of the Securities Exchange Act of 1934 sections 10(b), 20(a) and 20(A), as well as Rule 10b-5. The plaintiffs generally claim that Yahoo! issued false, deceptive or misleading statements concerning its advertising business, financial results, and sales and growth...

  • Page 34
    ... on our financial position, results of operations or cash flows. In the event of a determination adverse to Yahoo!, its subsidiaries, directors or officers, we may incur substantial monetary liability, and be required to change our business practices. Either of these could have a material adverse...

  • Page 35
    ... plans to pay any cash dividends in the near future. Issuer Purchases of Equity Securities Stock repurchase activity during the three months ended December 31, 2007 was as follows: Total Number of Shares Purchased as Part of a Publicly Announced Program Approximate Dollar Value of Shares that May...

  • Page 36
    ...as amended or the Exchange Act. The following graph compares, for the five year period ended December 31, 2007, the cumulative total stockholder return for the Company's common stock, the Nasdaq Stock Market (U.S. companies) Index (the "Nasdaq Market Index"), the Goldman Sachs Internet Trading Index...

  • Page 37
    ... share for the year ended December 31, 2006 was $0.16 and $0.15 lower, respectively, than if the Company had continued to account for stock-based compensation under APB 25. (2) (3) Consolidated Balance Sheets Data: 2003 2004 December 31, 2005 (In thousands) 2006 2007(*) Cash and cash equivalents...

  • Page 38
    ...newspaper publishing companies), are a subset of our Affiliates and are primarily Websites and search engines that attract users by providing content of interest, presented on Web pages that have space for advertisements. To users, we provide owned and operated online properties and services ("Yahoo...

  • Page 39
    ...text-based links to the Websites of our advertisers ("search advertising") which are placed on Yahoo! Properties and on Affiliate sites. We recognize revenues from these arrangements as "click-throughs" occur. A "click-through" occurs when a user clicks on an advertiser's listing. Marketing services...

  • Page 40
    ...additional information. Summary We believe the search queries, Page Views, click-throughs, and the related marketing services and fees revenues that we generate correlate to the number and activity level of users across our offerings on Yahoo! Properties and the activity level on our Affiliate sites...

  • Page 41
    ... Internet search results ranked and sorted based on relevance to the user's search query. "Sponsored search results" are a subset of the overall search results, and provide links to paying advertisers' Web pages. We currently generate marketing services revenues principally from display advertising...

  • Page 42
    ... marketing services revenues across Yahoo! Properties both domestically and internationally. These included an increase in our user base and activity levels on Yahoo! Properties, which resulted in a higher volume of search queries, ad impression displays, and click-throughs. We periodically review...

  • Page 43
    ... Operated sites to increase in absolute dollars for 2008 compared to 2007 as we seek to increase marketing services revenues on Yahoo! Properties by providing a more relevant search experience to users, providing more relevant and valuable customer leads to advertisers from our new search marketing...

  • Page 44
    ... additional information about stock-based compensation. Cost of Revenues. Cost of revenues consists of traffic acquisition costs and other expenses associated with the production and usage of Yahoo! Properties, including amortization of acquired intellectual property rights and developed technology...

  • Page 45
    ... dollars as our marketing services revenues and TAC rates increase in the increasingly competitive advertising market. Additionally, we expect to continue to increase our communities of users and offerings, which drive network usage and in turn higher Internet connection charges and data center...

  • Page 46
    ... and marketing expenses will increase in absolute dollars in 2008 compared to 2007, as we continue to grow and expand our reach to advertisers and users. Product Development. Product development expenses consist primarily of compensation related expenses (including stock-based compensation expense...

  • Page 47
    ...-based compensation expense), compared to 8 percent and 6 percent in 2006 and 2005, respectively. We currently believe that general and administrative expenses in absolute dollars will increase in 2008 compared to 2007, as we continue to invest in our infrastructure to support our continued business...

  • Page 48
    ...equity investments during the year. The resulting tax benefit recorded in 2005 was approximately $248 million. See Note 10 - "Income Taxes" in the consolidated financial statements for additional information. Based on current estimates, we expect our effective tax rate will increase in 2008 compared...

  • Page 49
    ... shares of Yahoo! Europe and Yahoo! Korea from our partner in these ventures, and accordingly, these entities became our wholly owned subsidiaries. See Note 3 - "Acquisitions" in the consolidated financial statements for additional information. Business Segment Results We manage our business...

  • Page 50
    ..., and stock-based compensation expense would have been lower than we reported by $16 million. Transactions Significant acquisitions and strategic investments completed in the last three years include the following: • February 2005 - Verdisoft, a software development company for a purchase price of...

  • Page 51
    ... Network Limited, an Australian media company, to form Yahoo! 7 to which we contributed our Australian Internet business Yahoo! Australia and New Zealand ("Yahoo! Australia"), and Seven contributed its online assets, television and magazine content and cash of $7 million; • June 2006 - Investment...

  • Page 52
    ... value for securities is determined based on quoted market prices as of the valuation date. We also invest excess cash to support our growing infrastructure needs and expand our operations, as consideration for acquisitions and strategic investments, to repurchase shares of our stock, and in other...

  • Page 53
    ... have been primarily used for purchases and internal development of information technology assets, and real estate to support our expanding offerings, and our increased number of users. We invested a net $974 million in acquisitions, including strategic investments, in 2007, compared to $142 million...

  • Page 54
    ... additional information. Stock repurchases In October 2006, our Board of Directors authorized a new stock repurchase program for us to repurchase up to $3.0 billion of our outstanding shares of common stock from time to time over the next five years, depending on market conditions, share price, and...

  • Page 55
    ... to provide sponsored search and/or display advertising services to our Affiliates, which represent traffic acquisition costs. We are obligated to make payments under various arrangements with vendors and other business partners, principally for marketing, bandwidth, and content arrangements. As of...

  • Page 56
    ... the display of textual, rich media advertisements, display of text based links to advertisers' Websites, listing based services, and commerce-based transactions. Fees revenues includes revenue from a variety of consumer and business fee-based services. While the majority of our revenue transactions...

  • Page 57
    ... control using the equity method. In accounting for these investments we record our proportionate share of these entities' net income or loss, one quarter in arrears. We review all of our investments in equity interests for impairment whenever events or changes in business circumstances indicate...

  • Page 58
    ... investments. Interest Rate Risk. Our exposure to market rate risk for changes in interest rates relates primarily to our investment portfolio. We invest excess cash in marketable debt instruments of the United States Government and its agencies, and in high-quality corporate issuers and, by policy...

  • Page 59
    ...million and $1.0 billion, respectively, based on quoted market prices. Foreign Currency Risk. International revenues accounted for approximately 32 percent of total revenues in both 2007 and 2006. International revenues in 2007 increased $182 million, or 9 percent, as compared to 2006. The growth in...

  • Page 60
    ... Financial Statements: Report of Independent Registered Public Accounting Firm ...Consolidated Statements of Income for each of the three years in the period ended December 31, 2007 ...Consolidated Balance Sheets as of December 31, 2006 and 2007 ...Consolidated Statements of Cash Flows for...

  • Page 61
    ... in Note 1 to the consolidated financial statements, effective January 1, 2006, the Company changed its method of accounting for stock-based compensation in accordance with Statement of Financial Accounting Standards No. 123 (revised 2004), "Share-Based Payment". In addition, as discussed in...

  • Page 62
    ...,230 Net income per share - basic ...$ Net income per share - diluted ...$ Shares used in per share calculation - basic...Shares used in per share calculation - diluted ...Stock-based compensation expense by Cost of revenues ...Sales and marketing ...Product development ...General and administrative...

  • Page 63
    ... par values) ASSETS Current assets: Cash and cash equivalents ...Short-term marketable debt securities ...Accounts receivable, net of allowance of $38,196 Prepaid expenses and other current assets ...Total current assets ...Long-term marketable debt securities Property and equipment, net...Goodwill...

  • Page 64
    ... securities Acquisitions, net of cash acquired ...Proceeds from sales of marketable equity securities ...Purchases of intangible assets ...Other investing activities, net ... Net cash used in investing activities ...CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock, net...

  • Page 65
    ..."Investments in Equity Interests" for additional information. During the year ended December 31, 2006, the Company contributed its Australian Internet business, Yahoo! Australia and New Zealand as consideration for its strategic partnership with Seven Network Limited. See Note 3 - "Acquisitions" for...

  • Page 66
    ...in connection with business contribution ...- Tax benefits from stock-based awards...759,530 Structured stock repurchases, net ...(611,421) Other ...- Balance, end of year ...6,417,858 Deferred stock-based compensation Balance, beginning of year ...(28,541) Common stock and stock-based awards issued...

  • Page 67
    Yahoo! Inc. Consolidated Statements of Stockholders' Equity - (Continued) Years Ended December 31, 2005 2006 2007 Number of Outstanding Shares (In thousands) Common stock Balance, beginning of year ...Common stock and restricted stock Repurchases of common stock ...Balance, end of year ... ......

  • Page 68
    ... Websites and search engines that attract users by providing content of interest, presented on Web pages that have space for advertisements. To developers, Yahoo! provides an innovative and easily accessible array of Web Services and Application Programming Interfaces ("APIs"), technical resources...

  • Page 69
    ...a user clicks on an advertiser's listing. In addition to delivering search and display advertising on Yahoo! Properties, the Company also generates revenues from search and/or display advertising offerings on Affiliate sites. The Company pays Affiliates for the revenues generated from the display of...

  • Page 70
    ..., number of searches, or other metrics are expensed based on the volume of the underlying activity or revenue multiplied by the agreed-upon price or rate. Product Development. Product development expenses consist primarily of compensation related expenses (including stock-based compensation expense...

  • Page 71
    ... determined based on quoted market prices as of the valuation date. In computing realized gains and losses on available-for-sale securities, the Company determines cost based on amounts paid, including direct costs such as commissions, to acquire the security using the specific identification method...

  • Page 72
    ... value of privately held investments is estimated using the best available information as of the valuation date, including current earnings trends, undiscounted cash flows, quoted stock prices of comparable public companies, and other company specific information, including recent financing rounds...

  • Page 73
    Yahoo! Inc. Notes to Consolidated Financial Statements - (Continued) Foreign Currency. The functional currency of the Company's international subsidiaries is generally the local currency. The financial statements of these subsidiaries are translated into United States dollars using period-end rates ...

  • Page 74
    ...2007 (in millions): Purchase Price Goodwill Amortizable Intangibles 2005 Verdisoft ...Yahoo! Europe(1) and Yahoo! Korea...Other acquisitions ...Alibaba (see Note 4 - "Investments in Equity Interests") 2006 Yahoo! 7...Gmarket Inc.(2) ...Other acquisitions ...2007 Right Media ...Zimbra ...BlueLithium...

  • Page 75
    ..., the Company acquired Verdisoft Corporation ("Verdisoft"), a software development company. The acquisition of Verdisoft enhanced the Company's platform for delivering content and services to mobile devices as part of the Company's strategy to provide users with seamless access to its network. The...

  • Page 76
    ... Company contributed its Australian Internet business, Yahoo! Australia and New Zealand ("Yahoo! Australia"), and Seven contributed its online assets, television and magazine content, an option to purchase its 33 percent ownership interest in mobile solutions provider m.Net Corporation Ltd, and cash...

  • Page 77
    ... publishing network and is a key step in executing the Company's longterm strategy to change how online advertisers and publishers connect to their audiences in one open advertising community. The purchase price exceeded the fair value of net tangible and intangible assets acquired from Right Media...

  • Page 78
    ...The Company believes the acquisition of Zimbra will further strengthen its position in Web mail and expand the Company's presence in universities, small and medium businesses and service provider partners. The purchase price exceeded the fair value of net tangible and intangible assets acquired from...

  • Page 79
    ... will settle in, shares of Yahoo! common stock. The total purchase price of $255 million consisted of $245 million in cash consideration, $8 million in equity assumed/exchanged, and $2 million of direct transaction costs. The $245 million of total cash consideration less cash acquired of $10 million...

  • Page 80
    ... to cash acquired. In connection with these acquisitions, the Company also issued stock-based awards valued at $19 million that will be recognized as stockbased compensation expense over the next three years. The results of operations for Right Media, Zimbra, BlueLithium, and certain other business...

  • Page 81
    ... 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. The investment in Alibaba is being accounted for using the equity method...

  • Page 82
    ...income, net, based on the difference between the fair value of Yahoo! China and its carrying value adjusted for the Company's continued ownership in the newly combined entity. As a result of the conversion of Alibaba's outstanding convertible debt and the exercise of Alibaba's employee stock options...

  • Page 83
    ...Alibaba.com, based on the quoted stock price, was approximately $104 million as of December 31, 2007. Equity Investment in Yahoo! Japan. During April 1996, the Company signed a joint venture agreement with SOFTBANK, which was amended in September 1997, whereby Yahoo! Japan Corporation ("Yahoo! Japan...

  • Page 84
    ... in Japan as Yahoo! Japan is responsible for the fulfillment of all advertiser and Affiliate services. Under this arrangement, the Company records marketing services revenue from Yahoo! Japan for the provision of search marketing services based on a percentage of advertising revenues earned by Yahoo...

  • Page 85
    ..., affiliate and advertiser related relationships ...Developed technology and patents...Trademark, trade name and domain name ...Total intangible assets, net...(1) $ 252,792 689,873 208,069 $1,150,734 $(109,597) (305,832) (123,808) $(539,237) $143,195 384,041 84,261 $611,497 Foreign currency...

  • Page 86
    ... and have original estimated useful lives as follows: • Customer, affiliate and advertiser related relationships - three to seven years; • Developed technology and patents - two to five years; and • Trademark, trade name and domain name - one to seven years. The Company recognized amortization...

  • Page 87
    ... and other current liabilities consisted of the following (in thousands): 2006 2007 Accrued content, connection, traffic acquisition, and other costs ...$ Deferred income taxes (Note 10) ...Accrued compensation and related expenses ...Accrued taxes payable ...Accrued professional service expenses...

  • Page 88
    Yahoo! Inc. Notes to Consolidated Financial Statements - (Continued) Deferred and other long-term tax liabilities, ...,800 Foreign currency translation, net of tax ...128,705 Accumulated other comprehensive income (loss) ...$150,505 Note 8 INVESTMENTS The following tables summarize the investments in ...

  • Page 89
    ...Statements - (Continued) December 31, 2006 2007 Reported as: Short-term marketable debt securities ...Long-term marketable debt securities...Other assets(*) ...Total ... $1,031,528 935,886 114,220 $2,081,634 $487,544 361,998 125,913 $975,455 Available-for-sale securities included in cash and cash...

  • Page 90
    ... $ (2,935) The Company's investment portfolio consists of government and high-quality corporate securities. Investments in both fixed rate and floating rate interest earning instruments carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely impacted...

  • Page 91
    ...$1,000 principal amount of the Notes will initially be convertible into 48.78 shares of Yahoo! common stock. The Notes are convertible prior to the final maturity date (1) during any fiscal quarter if the closing sale price of the Company's common stock for at least 20 trading days in the 30 trading...

  • Page 92
    ...Income tax at the United States federal statutory rate of 35 percent ...$ 890,254 State income taxes, net of federal benefit ...113,685 Change in valuation allowance ...16,342 Non-deductible stock-based compensation ...1,400 Capital (loss)/gain on subsidiary restructuring transaction(1) ...(248,284...

  • Page 93
    ...million, and increased earnings in equity interests by $6 million (as a result of the favorable effect of foreign tax credits related to dividends received in 2006 and 2007). In the 2007 statement of cash flows, the Company reduced by $92 million, excess tax benefits from stock-based awards recorded...

  • Page 94
    ... upon the adoption of FIN 48 and at December 31, 2007 was immaterial. The Company files income tax returns in the United States on a federal basis and in many U.S. state and foreign jurisdictions. The tax years 1995 to 2007 remain open to examination by the major taxing jurisdictions in which the 92

  • Page 95
    ... than the person or group triggering their exercise) will be able to purchase, in exchange for the $250 exercise price, shares of its common stock or of any company into which the Company is merged having a value of $500. The rights expire on March 1, 2011, unless extended by the Company's Board of...

  • Page 96
    ....1 million shares, which are recorded as part of treasury stock. Treasury stock is accounted for under the cost method. See Note 17 - "Subsequent Events" for additional information related to Stock Repurchase Transactions. Note 12 EMPLOYEE BENEFITS Benefit Plans. The Company maintains a Yahoo! Inc...

  • Page 97
    ... on the date of grant based on the number of shares granted and the quoted price of the Company's common stock. Such value is recognized as an expense over the corresponding service period. Each share of the Company's common stock issued in settlement of restricted stock awards is counted as 1.75...

  • Page 98
    ... to purchase shares of the Company's common stock through payroll deductions of up to 15 percent of their annual compensation subject to certain Internal Revenue Code limitations. The price of common stock purchased under the Purchase Plan is equal to 85 percent of the lower of the fair market value...

  • Page 99
    ... 4.4% 39% 34% 34% 34% 33% 32% 3.75 3.75 3.64 0.88 1.25 1.11 The Company currently has no history or expectation of paying cash dividends on its common stock. The risk-free interest rate is based on the United States Treasury yield for a term consistent with the expected life of the awards in effect...

  • Page 100
    ...Since October 1, 2005, the Company began exclusively using market based implied volatility for the computation. AND Note 13 COMMITMENTS CONTINGENCIES Operating Lease Commitments. The Company leases office space and data centers under operating lease agreements with original lease periods up to 23...

  • Page 101
    ... which the Company can exercise at the end of the initial lease term: (a) renewal of the lease for a defined number of years at the then fair market rental rate or at a slight discount to the fair market rental rate; (b) purchase of the property at the then fair market value; or (c) right of first...

  • Page 102
    ... and other intellectual property rights, claims related to employment matters, and a variety of other claims, including claims alleging defamation or invasion of privacy, arising in connection with the Company's e-mail, message boards, auction sites, shopping services, and other communications...

  • Page 103
    ... relating to financial reporting, misappropriation of information, abuse of control and waste of corporate assets. The federal derivative action includes an additional claim for alleged violation of Section 10(b) of the Securities Exchange Act of 1934. The derivative actions seek unspecified damages...

  • Page 104
    ... 2000 services agreement. In August 2004, Google issued 2.7 million shares of Class A common stock in settlement of the two disputes. The Company agreed to dismiss the 361 patent lawsuits and granted to Google a fully-paid license to the 361 patent as well as several related patent applications held...

  • Page 105
    ... management reporting process that provides revenue and segment operating income before depreciation, amortization and stock-based compensation expense for making financial decisions and allocating resources. Segment operating income before depreciation, amortization, and stock-based compensation...

  • Page 106
    ... leading online video platform provider. The Company believes the acquisition of Maven will expand state-of-theart consumer video and advertising experiences on Yahoo! and the Company's network of leading premium video publishers across the Web. Under the terms of the agreement, the Company acquired...

  • Page 107
    ... event their employment is terminated. These benefits generally include (1) continuation of the employee's annual base salary, as severance pay for a designated number of months following the employee's severance date; (2) reimbursement for outplacement services; (3) continued medical group health...

  • Page 108
    ... Charged to Net of Expenses Recoveries (In thousands) Balance at End of Year Accounts receivable Allowance for doubtful accounts 2005 ...2006 ...2007 ... $ 34,215 41,857 38,196 $ 14... unrealized excess tax benefits from stock-based awards and their related valuation allowance, in connection with the adoption...

  • Page 109
    ...0.19 $ 1,355,566 1,419,143 0.11 $ 0.10 $ 0.12 $ 0.11 $ 0.11 $ 0.11 $ 0.15 0.15 1,328,784 1,396,306 Shares used in per share calculation - basic ...1,417,917 1,405,598 Shares used in per share calculation - diluted . . 1,493,307 1,476,642 1,352,476 1,339,594 1,418,225 1,403,819 1,335,092 1,395,056...

  • Page 110
    ... Company's management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Under the supervision and with the participation of the Company's management, including its principal executive...

  • Page 111
    ... Financial Statements: Report of Independent Registered Public Accounting Firm ...Consolidated Statements of Income for each of the three years in the period ended December 31, 2007 ...Consolidated Balance Sheets as of December 31, 2006 and 2007 ...Consolidated Statements of Cash Flows for...

  • Page 112
    ... 24, 2005, by and between Yahoo! Inc. and Alibaba.com Corporation (Filed as Exhibit 2.2 to the Registrant's Current Report on Form 8-K, filed October 27, 2005 [the October 27, 2005 Form 8-K] and incorporated herein by reference.) Tao Bao Share Purchase Agreement, dated as of October 24, 2005, by...

  • Page 113
    ... and incorporated herein by reference.) 10.7 Yahoo! Japan License Agreement dated April 1, 1996 by and between the Registrant and Yahoo! Japan Corporation (Filed as Exhibit 10.43 to Amendment No. 2 to the Registrant's Registration Statement on Form S-3, Registration No. 333-100298, filed on December...

  • Page 114
    ... Agreement, dated as of May 30, 2007, between Yahoo! Inc. and Farzad Nazem (Filed as Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on May 30, 2007 and incorporated herein by reference.) Yahoo! Inc. Change in Control Employee Severance Plan for Level I and Level II Employees List...

  • Page 115
    ... of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: Signature Title Date /s/ JERRY YANG Jerry Yang Chief Executive Officer and Director (Principal Executive Officer) Chief...

  • Page 116
    Signature Title Date /s/ ARTHUR KERN Arthur Kern Director February 27, 2008 /s/ ROBERT KOTICK Robert Kotick /s/ EDWARD KOZEL Edward Kozel /s/ MARY AGNES WILDEROTTER Mary Agnes Wilderotter /s/ GARY WILSON Gary ...

  • Page 117
    ... to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Jerry Yang, certify that: 1. I have reviewed this Form 10-K of Yahoo! Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material...

  • Page 118
    ... to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Blake Jorgensen, certify that: 1. I have reviewed this Form 10-K of Yahoo! Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material...

  • Page 119
    ...2002 In connection with the Annual Report on Form 10-K of Yahoo! (the "Company") for the year ended December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Jerry Yang, as Chief Executive Officer of the Company, and Blake Jorgensen, as Chief Financial...

  • Page 120
    ...(Address of principal executive offices, including zip code) Registrant's telephone number, including area code: (408) 349-3300 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered Common stock, $.001 par value Rights to Purchase...

  • Page 121
    ...any events which occurred at a date subsequent to the filing of the Original Filing. Part III Item 10. Directors, Executive Officers and Corporate Governance OUR EXECUTIVE OFFICERS Executive officers are elected by and serve at the discretion of the board of directors. Set forth below is information...

  • Page 122
    ... Securities and Exchange Commission (the "SEC"), the listing standards of The Nasdaq Stock Market ("Nasdaq") and the Company's Corporate Governance Guidelines. Mr. Yang's biography is set forth under the heading "Our Executive Officers." Mr. Bostock has served as Chairman of the Board since January...

  • Page 123
    ...has served as a member of the board of directors since November 2001. Mr. Burkle is managing partner of The Yucaipa Companies, a private investment firm, which he co-founded in 1986. Mr. Burkle also serves as a director of Occidental Petroleum Corp. and KB Home Corporation. Mr. Hippeau has served as...

  • Page 124
    ...Corporate Governance." Next, click on, as applicable, "Code of Ethics" or "Guide to Business Conduct and Ethics." Code of Ethics. The Company's Code of Ethics applies to our Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer and Controller and sets forth specific policies...

  • Page 125
    ... in an equivalent number of shares of common stock immediately prior to the effectiveness of such Corporate Transaction. The non-executive Chairman of the board of directors receives an additional annual fee of $275,000 for his service as Chairman payable in cash. The Company also pays an annual fee...

  • Page 126
    ... earned during 2007 in the form of options to purchase the Company's common stock. Accordingly, Mr. Bostock was granted an option to purchase 161 shares on December 31, 2007 with an exercise price of $23.26, which had a grant date fair value of $1,377. In lieu of cash, Mr. Hippeau elected to receive...

  • Page 127
    ... of our executive team: • acquisition of Right Media Inc., an online advertising exchange, and BlueLithium Inc., an online global ad network, to further the Company's objectives in building the industry's leading advertising and publishing network; • launching Yahoo! Search Assist, among...

  • Page 128
    ... combining Yahoo!'s search and display advertising sales teams in the U.S. to better serve all our advertisers' marketing objectives from brand awareness to direct response; • strengthening of the Company's position in advertising, social media, communications and mobile through a range of product...

  • Page 129
    ... of the Company's stockholders, over 90% of Ms. Decker's total direct compensation opportunity for 2007 was performance-based and tied directly to stockholder value creation. As described in more detail below, the new arrangement increased Ms. Decker's base salary and annual target bonus opportunity...

  • Page 130
    ...group compensation data is to generally inform the Compensation Committee regarding competitive pay levels. Current Executive Compensation Program Elements Base Salaries The Company provides base salaries to executive officers primarily to provide them with a minimum fixed level of cash compensation...

  • Page 131
    ... network strategies, with the acquisitions of Right Media Inc. and BlueLithium, Inc., and its platform strategy with the development of its new online display advertising platform; continued expansion of the Newspaper Consortium; and continued expansion of the Company's network of premium publishers...

  • Page 132
    ..., responsibilities, experience and value to the Company. Stock Options. The Company makes a substantial portion of our long-term incentive grants to Named Executive Officers in the form of stock options with an exercise price that is equal to the closing price of our common stock on the grant date...

  • Page 133
    ... plan, which is approved by the stockholders. The per share exercise price of stock options cannot be less than the closing sale price of the Company's common stock on the Nasdaq Stock Market on the grant date. Compensation Committee Actions after Fiscal 2007 Change in Control Severance Plan. On...

  • Page 134
    ... of 3,000 shares of Company common stock. Executive officers are required to retain 100% of any of their shares of restricted stock that become vested until such ownership levels have been achieved. Policy with Respect to Section 162(m) Section 162(m) of the Internal Revenue Code limits the tax...

  • Page 135
    ... Benefits in Yahoo!'s financial statements in the Form 10-K for the respective year. See the Grants of Plan-Based Awards - Fiscal 2007 table for information on options granted in 2007. In 2007, represents for Ms. Decker, car services of $29,335, Company contributions under the Company's 401(k) Plan...

  • Page 136
    ... pursuant to his three-year performance and retention compensation arrangement with the Company approved in May 2006, Mr. Semel received an annual bonus for 2006 in the form of a fully-vested stock option to purchase 800,000 shares of Yahoo! common stock. The Option Awards amount includes $8,359,100...

  • Page 137
    ... the impact of estimated forfeitures related to service-based vesting conditions. For additional information on the valuation assumptions underlying the grant date fair value of these awards, see Note 12 of the Yahoo! consolidated financial statements in the 2007 Form 10-K, as filed with the SEC...

  • Page 138
    ... Semel's employment for a period of three years. Each of the options granted to Named Executive Officers during 2007 has a per-share exercise price equal to the closing price of our common stock on the grant date and a maximum term of seven years. These options do not include any dividend rights. 19

  • Page 139
    ...'s continued employment with the Company, each of the restricted stock unit awards is payable in shares of the Company's common stock on a one-for-one basis following the vesting date. The restricted stock unit awards granted to Named Executive Officers during 2007 do not include any dividend rights...

  • Page 140
    ... of Securities Underlying Unexercised Unearned Options (#) Option Exercise Price ($) Option Expiration Date Number of Shares or Units of Stock That Have Not Vested (#) Market Value of Shares or Units of Stock That Have Not Vested ($)(1) Susan L. Decker... 1,000,000 250,000 445,000 125,000 166...

  • Page 141
    ... option exercise price and the fair market value of Yahoo! common stock on the date of exercise, multiplied by the number of shares for which the option was exercised. The value realized equals the fair market value of Yahoo! common stock on the vesting date, multiplied by the number of shares that...

  • Page 142
    ... each of the Named Executive Officers currently employed by the Company. The material terms of these plans are described in a Form 8-K filed by the Company with the SEC on February 19, 2008. Daniel Rosensweig On December 5, 2006, the Company entered into an agreement with Mr. Rosensweig effecting...

  • Page 143
    ... other than option and stock appreciation rights with an exercise or base price that is no less than the fair market value of a share of common stock on the date the award is granted) under the 1995 Stock Plan counted as 1.75 shares until June 11, 2007 and 2.00 shares beginning on June 12, 2007...

  • Page 144
    ... to applicable community property laws, each stockholder named in the table has sole voting and investment power with respect to the shares set forth opposite such stockholder's name. For each person and group included in the table, percentage ownership is calculated by dividing the number of shares...

  • Page 145
    ... the date the director's service terminates. Based on information provided by Mr. Rosensweig, the beneficial ownership information is as of December 31, 2007. Includes 715,625 shares issuable upon exercise of options exercisable within 60 days of December 31, 2007 under the Company's 1995 Stock Plan...

  • Page 146
    ... of directors who, in the business judgment of the Board, qualify as Independent Directors under applicable SEC rules, the Nasdaq listing standards and the Company's Guidelines. Each director's relationships with the Company (either directly or as a partner, stockholder or officer of an organization...

  • Page 147
    ... of an executive officer of such entity. The Board reviewed the Company's relationship with and the Company's investment in a venture capital fund managed by SOFTBANK Capital (for which Mr. Hippeau serves as a Managing Partner). Pursuant to a 1999 partnership agreement, the Company invested on the...

  • Page 148
    ... of the audit or review of Yahoo!'s consolidated financial statements and are not reported under "Audit Fees." These services include accounting consultations and due diligence in connection with mergers and acquisitions, attest services related to financial reporting that are not required...

  • Page 149
    ... are incorporated herein by reference or are filed with this report as indicated below (numbered in accordance with Item 601 of Regulation S-K): Exhibit Number Description 31.1 31.2 Certificate of Chief Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as Adopted...

  • Page 150
    ... the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Amendment to be signed on its behalf by the undersigned hereunto duly authorized, on the 29th day of April 2008. YAHOO! INC. By: /s/ BLAKE JORGENSEN Blake Jorgensen Chief Financial...

  • Page 151
    ... to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Jerry Yang, certify that: 1. I have reviewed this Form 10-K/A of Yahoo! Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material...

  • Page 152
    ... Pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Blake Jorgensen, certify that: 1. I have reviewed this Form 10-K/A of Yahoo! Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of...

  • Page 153
    ... for a Drug Free America Ron Burkle Founder and Managing Partner, The Yucaipa Companies Eric Hippeau Managing Partner, SOFTBANK Capital Vyomesh Joshi Executive Vice President, Imaging and Printing Group, Hewlett-Packard Company Arthur Kern Investor Chairman, American Media Management, Inc. Robert...

  • Page 154
    ... Senior Vice President, Chief Human Resources Officer OPERATIONS OFFICERS Marco Boerries Executive Vice President, Connected Life Division Dr. Usama Fayyad Executive Vice President, Chief Data Officer Dr. Qi Lu Executive Vice President, Search and Advertising Technology Group Venkat Panchapakesan...

  • Page 155
    CORPORATE HEADQUARTERS 701 First Avenue Sunnyvale, CA 94089 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP San Jose, CA 95113 TRANSFER AGENT Computershare Trust Company, N.A. P.O. Box 43078 Providence, RI 02940-3078 YAHOO! INVESTOR RELATIONS 701 First Avenue Sunnyvale, ...

  • Page 156
    This annual report was printed on recycled paper. For more information on how we can all help the planet, visit green.yahoo.com.