Yahoo 2007 Annual Report Download - page 81

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results of the Company and the 2007 acquisitions as if the acquisitions had occurred at the beginning of 2006 (in
thousands, except per share amounts):
Year Ended
December 31,
2006
Year Ended
December 31,
2007
Net revenues ............................................ $6,522,959 $7,054,888
Net income (loss) ......................................... $ 607,208 $ 511,858
Net income (loss) per share — basic ........................... $ 0.44 $ 0.38
Net income (loss) per share — diluted ......................... $ 0.41 $ 0.36
The above unaudited pro forma financial information includes adjustments for interest income on cash disbursed for
the acquisitions, amortization of identifiable intangible assets, stock-based compensation expense, and related tax
effects.
See Note 17 — “Subsequent Events” for additional information related to the acquisition of Maven Network Inc.
Note 4 INVESTMENTS IN EQUITY INTERESTS
As of December 31, investments in equity interests consisted of the following (dollars in thousands):
2006 2007
Percent
Ownership
Alibaba Group .................................. $1,411,651 $1,440,278 43%
Alibaba.com .................................... — 100,804 1%
Yahoo! Japan ................................... 476,870 636,164 34%
Other ......................................... 3,313 3,671
Total........................................ $1,891,834 $2,180,917
Equity Investment in the Alibaba Group. On October 23, 2005, the Company acquired approximately 46 percent
of the outstanding common stock of Alibaba Group Holding Limited, which represented 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 Network Software Company Limited (“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. The investment in Alibaba is being accounted for using the equity
method, and the total investment, including net tangible assets, identifiable intangible assets and goodwill, is
classified as part of investments in equity interests on the Company’s consolidated balance sheets. The Company
records its share of the results of Alibaba and any related amortization expense, one quarter in arrears, within
earnings in equity interests on the consolidated statements of income.
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. In
allocating the excess of the carrying value of its investment in Alibaba over its proportionate share of the net assets
of Alibaba, the Company allocated a portion of the excess to goodwill to account for the estimated reductions in the
carrying value of the investment in Alibaba that may occur as the Company’s equity interest is diluted to 40 percent.
As of December 31, 2007, the Company’s ownership interest in Alibaba was 43 percent, an approximate 3 percent
decrease from the initial investment, as a result of the conversion of Alibaba’s outstanding convertible debt in April
79
Yahoo! Inc.
Notes to Consolidated Financial Statements — (Continued)