Yahoo 2007 Annual Report Download - page 82

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2006 and the exercise of Alibaba’s employee stock options. The Company’s ownership interest in Alibaba may be
further diluted to 39 percent upon additional exercise of Alibaba’s employee stock options. The Company will
recognize non-cash gains if and when such further dilution to its ownership interest in Alibaba occurs, as such
reduction in interest results in an incremental sale of Yahoo! China.
As of December 31, 2007, the difference between the Company’s carrying value of its investment in Alibaba and its
proportionate share of the net assets of Alibaba is summarized as follows (in thousands):
Carrying value of investment in Alibaba .................................... $1,440,278
Proportionate share of net assets of Alibaba
(*)
............................... 942,614
Excess of carrying value of investment over proportionate share of net assets ...... $ 497,664
The excess carrying value has been primarily assigned to:
Goodwill . ........................................................ $ 443,975
Amortizable intangible assets .......................................... 55,422
Deferred income taxes ............................................... (1,733)
Total . . ........................................................ $ 497,664
(*)
The majority of assets are comprised primarily of goodwill and intangible assets.
The amortizable intangible assets have useful lives not exceeding seven years and a weighted average useful life of
approximately five years. No amount has been allocated to in-process research and development. Goodwill is not
deductible for tax purposes.
As a result of the divestiture of Yahoo! China in the fourth quarter of 2005, the Company recorded a non-cash gain
of $338 million in other 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 described above, the Company recorded non-cash gains of approximately $15 million and $8 million,
respectively, during the years ended December 31, 2006 and 2007. These gains were recorded in other income, net
to account for an approximate 3 percent reduction in the Company’s ownership interest in Alibaba from 46 percent
to 44 percent in 2006, and from 44 percent to 43 percent in 2007. These reductions were treated as incremental sales
of additional equity interests in Yahoo! China.
The following table presents Alibaba’s financial information, as derived from the Alibaba financial statements,
which includes summary operating information for the twelve months ended September 30, 2006 and the nine
months ended June 30, 2007 and summary balance sheet information as of September 30, 2006 and June 30, 2007
(in thousands):
Twelve Months Ended
September 30,
2006
Nine Months Ended
June 30,
2007
Operating data:
(*)
Revenues ................................... $182,328 $205,738
Gross profit .................................. $131,971 $148,257
Loss from operations ........................... $(67,575) $ (47,314)
Net loss .................................... $(58,750) $ (47,024)
80
Yahoo! Inc.
Notes to Consolidated Financial Statements — (Continued)