Yahoo 2007 Annual Report Download - page 76

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of $3 million resulted in net cash outlay of $69 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
income. In connection with these business combinations, the Company also issued stock-based awards valued at
$4 million that is being recognized as compensation expense over a period of three years since acquisition.
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.
In the year ended December 31, 2005, the Company also completed immaterial asset acquisitions that did not
qualify as business combinations, and also made a strategic investment in the Alibaba Group, see Note 4 —
“Investments in Equity Interests.”
Transactions completed in 2006
Seven. On January 29, 2006, the Company and Seven Network Limited (“Seven”), a leading Australian media
company, completed a strategic partnership in which the 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 of $7 million. The Company believes this strategic partnership and the contribution of
the respective businesses with their rich media and entertainment content will create a comprehensive and engaging
online experience for local users and advertisers. The Company obtained a 50 percent equity ownership interest in
the newly formed entity, which operates as “Yahoo! 7.” Pursuant to a shareholders agreement and a power of
attorney granted by Seven to vote certain of its shares, the Company has the right to vote 50.1 percent of the
outstanding voting interests in Yahoo! 7 and control over the day-to-day operations and therefore consolidates
Yahoo! 7, which includes the operations of Yahoo! Australia. For accounting purposes, the Company is considered
to have acquired the assets contributed by Seven in exchange for 50 percent of the ownership of Yahoo! Australia.
Accordingly, the Company accounted for this transaction in accordance with SFAS No. 141 “Business Combi-
nations.” The total purchase price was $35 million including direct transaction costs of $2 million.
The allocation of the purchase price of the Company’s share of the assets acquired and liabilities assumed based on
their fair values was as follows (in thousands):
Cash acquired ......................................................... $ 3,763
Other tangible assets acquired.............................................. 2,400
Amortizable intangible assets:
Customer contracts, related relationships and developed technology and intellectual
property rights ..................................................... 18,600
Goodwill ............................................................. 16,030
Total assets acquired ................................................... 40,793
Deferred income taxes ................................................... (6,075)
Total .............................................................. $34,718
The amortizable intangible assets have useful lives not exceeding seven years and a weighted average useful life of
seven years. No amounts have been allocated to in-process research and development and approximately
$16 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.
As a result of this transaction, the Company’s ownership in Yahoo! Australia, which is now part of Yahoo! 7,
decreased to 50 percent. The Company effectively recognized a non-cash gain of approximately $30 million
representing the difference between the fair value of Yahoo! Australia and its carrying value adjusted for the
74
Yahoo! Inc.
Notes to Consolidated Financial Statements — (Continued)