Yahoo 2008 Annual Report Download

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Table of contents

  • Page 1

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  • Page 3
    ... to connect with those users, and I believe the financial opportunity is significant. To capitalize on this opportunity, we must rapidly evolve our user products and advertiser services to be best in class and make it easier for advertisers to buy from us, both on and off the Yahoo! network. This...

  • Page 4
    ... working hard to make search results more compelling and get users to what they want with fewer clicks. The next generation of Yahoo! Mail also took shape in 2008, bringing together email, instant messaging and mobile text messaging. We're adding and testing new Mail features including a "smarter...

  • Page 5
    ...), a set of complementary developer platforms designed to better open Yahoo! to third-party developers and publishers. We've invited developers to take advantage of our huge scale by writing applications that build on our popular properties, tap into millions of loyal users, and make users' Internet...

  • Page 6

  • Page 7
    ... reporting company ' Indicate by check mark whether the Registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ' No Í As of June 30, 2008, the aggregate market value of voting stock held by non-affiliates of the Registrant, based upon the closing sales price for the...

  • Page 8
    ...Related Stockholder Matters and Issuer Purchases of Equity Securities ...ITEM 6 Selected Financial Data ...ITEM 7 Management's Discussion and Analysis of Financial Condition and Results of Operations ...ITEM 7A Quantitative and Qualitative Disclosures About Market Risk ...ITEM 8 Financial Statements...

  • Page 9
    ... buy marketing solutions for the world's largest advertisers; and to deliver industry-leading open platforms that attract developers and publishers. We provide several key starting points where Internet users start their daily online activity, through such services as the Yahoo! Home Page; Search...

  • Page 10
    ... to create innovative applications and user experiences that will run across the Yahoo! network and beyond. • Introduced a new open Web services platform, Build your Own Search Service or Yahoo! Search BOSS, that provides third party developers access to Yahoo! Search infrastructure and technology...

  • Page 11
    ... and provide links to paying advertisers' Web pages. Yahoo! Local is a stand-alone local search offering, which helps users find local business listings and related content such as recommendations, user reviews, merchant photos, and maps. Yahoo! Maps provides interactive maps with zooming, real-time...

  • Page 12
    ... category leading properties. We generate revenues from our audience offerings from display advertising and fee-based services. Yahoo! News aggregates stories from major news agencies. Users receive free up-to-the-minute news coverage with video, text, photos, and audio content. Yahoo! Finance...

  • Page 13
    ... 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 14
    ... by a self-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...

  • Page 15
    ... obtain agreements with software publishers, Internet access providers, mobile carriers, device manufacturers and others to promote or distribute our services to their users. We compete with advertising networks, such as Google AdSense, America Online's Ad.com, as well as traditional media companies...

  • Page 16
    ... services; trademarks related to our brands, products and services; copyrights in software and creative content; trade secrets; and other intellectual property rights and licenses of various kinds. We seek to protect our intellectual property assets through patent, copyright, trade secret, trademark...

  • Page 17
    ... that directly compete for users with our offerings, including consumer e-mail, desktop search, local search, instant messaging, photos, maps, video sharing, content channels, mobile applications, and shopping services. We also compete with traditional media companies to attract advertising dollars...

  • Page 18
    ... marketing agreements, may be terminated at any time by the advertiser or Yahoo!. Search marketing agreements often have payments dependent upon usage or click-through levels. Accordingly, it is difficult to forecast marketing services revenues accurately. In addition, our expense levels are based...

  • Page 19
    ... by a number of factors, including among other issues: service outages; product malfunctions; data privacy and security issues; exploitation of our trademarks by others without permission; and poor presentation or integration of our search marketing listings by Affiliates on their sites or in...

  • Page 20
    ... such as user privacy and data protection, defamation, pricing, advertising, taxation, gambling, sweepstakes, promotions, billing, real estate, consumer protection, accessibility, content regulation, quality of services, telecommunications, mobile, television and intellectual property ownership and...

  • Page 21
    ...damage to the Yahoo! brands, and ultimately in a loss of users, advertising partners, or Affiliates which could adversely affect our business. In addition, various federal, state and foreign legislative or regulatory bodies may enact new or additional laws and regulations concerning data privacy and...

  • Page 22
    ... directly by us contains errors or is otherwise wrongfully provided to users, third parties could make claims against us. For example, we offer Web-based e-mail services, which expose us to potential risks, such as liabilities or claims resulting from unsolicited e-mail, lost or misdirected messages...

  • Page 23
    ... accommodate new technologies and Internet advertising solutions and new means of content delivery, such as rich media, audio, video, and mobile. In addition, the Internet and online services industry is characterized by rapid technological change. Widespread adoption of new Internet, networking or...

  • Page 24
    ..., which might not prove to be successful in generating significant revenue for us. We offer fee-based enhancements to many of our free services, including e-mail, personals, finance, games, music, photographs, and sports. The development cycles for these technologies are long and generally require...

  • Page 25
    ... of third-party Websites, online networks, software companies, electronics companies, computer manufacturers and others to promote or supply our services to their users. For example: • We supply search and display advertising to Affiliate sites, which integrate our advertising offerings into their...

  • Page 26
    ...In a number of international markets, especially those in Asia, Europe, and Latin America, we face substantial competition from local Internet service providers and other portals that offer search, communications, and other commercial services. Many of these companies have a dominant market share in...

  • Page 27
    ... developed that can block the display of our advertisements or our search marketing listings. Most of our revenues are derived from fees paid to us by advertisers in connection with the display of advertisements or clicks on search marketing listings on Web pages. As a result, advertisement-blocking...

  • Page 28
    ...pay a fee every time a user clicks on their advertising. This pricing model can be vulnerable to so-called "click fraud," which occurs when clicks are submitted on ads by a user who is motivated by reasons other than genuine interest in the subject of the ad. On Yahoo! Properties and Affiliate sites...

  • Page 29
    ... results, announcements and implementations of technological innovations or new services, upgrades and media properties by us or our competitors; changes in financial estimates and recommendations by securities analysts; the operating and stock price performance of other companies that investors...

  • Page 30
    ..., if a person or group acquires 15 percent or more of our outstanding common stock, holders of the rights (other than the person or group triggering their exercise) will be able to purchase, in exchange for the $250 exercise price, shares of our common stock or of any company into which we are...

  • Page 31
    ..., see Note 13-"Commitments and Contingencies" in the Notes to the consolidated financial statements, which is incorporated herein by reference. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of security holders during the fourth quarter of 2008. 25

  • Page 32
    ... Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock Yahoo! Inc. common stock is quoted on the NASDAQ Global Select Market under the symbol "YHOO." The following table sets forth the range of high and low per share sales prices as...

  • Page 33
    ...of Yahoo! under the Securities Act of 1933, as amended or the Exchange Act. The following graph compares, for the five-year period ended December 31, 2008, the cumulative total stockholder return for the Company's common stock, the NASDAQ Stock Market (U.S. companies) Index (the "NASDAQ Market Index...

  • Page 34
    ...related to the divestiture of Yahoo! China in connection with the strategic investment with Alibaba Group Holding Limited ("Alibaba Group"); and a tax benefit of $248 million related... a result of adopting Statement of Financial Accounting Standard ("SFAS") No. 123 (revised 2004), "Share-Based Payment...

  • Page 35
    ... Form 10-K includes, among others, forward-looking statements regarding our: • expectations about revenues, including revenues for marketing services and fees; • expectations about growth in users; • expectations about cost of revenues and operating expenses; • expectations about the amount...

  • Page 36
    ... and our Affiliate sites. We believe that our marketing services enable advertisers to deliver highly relevant marketing messages to their target audiences. Our offerings to users on Yahoo! Properties currently fall into six categories: Front Doors, Communities, Search, Communications, Audience, and...

  • Page 37
    ...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. By providing a platform for our users that brings together our search technology, content...

  • Page 38
    ... the consolidated financial statements. In the following Management's Discussion and Analysis, we discuss the following areas of our financial results: • Results of Operations; • Business Segment Results; • Transactions; • Liquidity and Capital Resources; • Critical Accounting Policies and...

  • Page 39
    ...yield 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 also receive revenues for Content Match links (advertising on Yahoo! Properties...

  • Page 40
    ... revenues as advertisers spend less on brand advertising. In addition, strengthening of the U.S. Dollar against other currencies could have a further negative impact on our international revenues. Marketing Services Revenues from Affiliate Sites. Marketing services revenues from Affiliate sites...

  • Page 41
    ... decline in revenues from certain Affiliate sites. Fees Revenues. Our fees revenues include premium fee-based services such as Internet broadband services, sports, music, photos, games, personals, premium e-mail offerings, and services for small businesses. Other fee-based revenues include royalties...

  • Page 42
    ... ended December 31, 2008, 2007, and 2006, cost of revenues included amortization expense of $194 million, $143 million, and $113 million, respectively, relating to acquired intellectual property rights and developed technology. Stock-based compensation expense was allocated as follows (in thousands...

  • Page 43
    ... center operating costs. Depreciation and amortization expense consists primarily of depreciation of server equipment and information technology assets and amortization of developed or acquired technology and intellectual property rights. Facilities expense consists primarily of building maintenance...

  • Page 44
    ... service provider expenses were primarily the result of incremental costs incurred in general and administrative expense of $79 million for 2008 for outside advisors related to Microsoft's proposals to acquire all or a part of the Company, other strategic alternatives, including the Google agreement...

  • Page 45
    ... million in related stock-based compensation expense reversals for unvested stock awards, resulting in a net restructuring charge of $92 million. Employee severance pay and related charges include benefits relating to notification periods, severance, outplacement services and employer related taxes...

  • Page 46
    ...foreign exchange re-measurement of assets and liabilities denominated in non-functional currencies. Other income, net for the year ended December 31, 2007 included a $6 million gain from the sale of Overture Japan and an $8 million non-cash gain arising from the reduction in our ownership in Alibaba...

  • Page 47
    ...made to prior year amounts in order to conform to the current year presentation. Our effective tax rate for the year ended December 31,...related to the tax benefit of our share of Alibaba Group's loss). See Note 4-"Investments in Equity Interests" in the Notes to the consolidated financial statements...

  • Page 48
    ... 2007 increase, or $286 million, came from marketing services revenues. Over the past year, our expanding user base has contributed to the growth in our advertising revenues. U.S. operating income before depreciation, amortization, and stock-based compensation expense for the year ended December 31...

  • Page 49
    ... new arrangement, we record marketing services revenues from Yahoo! Japan for the provision of search marketing services based on a percentage of advertising revenues earned by Yahoo! Japan for the delivery of sponsored search results. International operating income before depreciation, amortization...

  • Page 50
    ... in Right Media Inc. ("Right Media"), an online advertising exchange. In July 2007, we purchased the remaining equity interests in Right Media Inc. for a total purchase price of $524 million; • October 2007-Acquired Zimbra, Inc. ("Zimbra"), a provider of e-mail and collaboration software for...

  • Page 51
    ... strategic investments. Our capital expenditures totaled $675 million, $602 million, and $689 million in 2008, 2007, and 2006, respectively. Our capital expenditures have been primarily used for purchases and internal development of software to support our offerings and our increased number of users...

  • Page 52
    ... are reported as financing activities in the consolidated statements of cash flows. See Note 12-"Employee Benefits" in the Notes to the consolidated financial statements for additional information. Financing In April 2003, we issued $750 million of zero coupon senior convertible notes ("the Notes...

  • Page 53
    ... payments under contracts to provide sponsored search and/or display advertising services to our Affiliates, which represent TAC. We are obligated to make payments under various arrangements with vendors and other business partners, principally for marketing, bandwidth, and content arrangements. As...

  • Page 54
    ...our financial statements. Revenue Recognition. Our revenues are generated from marketing services and fees. Marketing services revenues are generated from several offerings including: the display of textual, graphical advertisements, display of textbased links to advertisers' Websites, listing based...

  • Page 55
    ...purchase goods and/or services from certain customers. As a result, significant contract interpretation is sometimes required to determine the appropriate accounting...the consolidated financial statements for additional information. We establish reserves for tax-related uncertainties based on ...

  • Page 56
    ... as the risk-free rate of return and the return an outside investor would expect to earn based on the overall level of inherent risk. The determination of expected returns includes consideration of the beta (a measure of risk) of traded securities of comparable companies. The discount rates used in...

  • Page 57
    ...expected to vest over the service period of the award. Calculating stock-based compensation expense requires the input of highly subjective assumptions, including the expected term of the stock-based options, stock price volatility, and the pre-vesting award forfeiture rate. We estimate the expected...

  • Page 58
    ... Dollars, British Pounds, Euros, Korean Won, and Taiwan Dollars. The statements of income of our international operations are translated into U.S. dollars at exchange rates indicative of market rates during each applicable period. To the extent the U.S. dollar strengthens against foreign currencies...

  • Page 59
    ... and corporate obligations and money market funds. As of December 31, 2008 and 2007, net unrealized gains and losses on these investments were not material. We invest in equity instruments of public companies for business and strategic purposes and have classified these securities as available...

  • Page 60
    Item 8. Financial Statements and Supplementary Data Page Index To Consolidated Financial Statements Consolidated 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, 2008 ......

  • Page 61
    ... with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related...

  • Page 62
    ...-basic ...Shares used in per share calculation-diluted ...Stock-based compensation expense by function: Cost of revenues ...Sales and marketing ...Product development ...General and administrative ...Restructuring expense reversals ...Total stock-based compensation expense ... $6,425,679 2,675,723...

  • Page 63
    ... ...Total current assets ...Long-term marketable debt securities ...Property and equipment, net ...Goodwill ...Intangible assets, net ...Other long-term assets ...Investments in equity interests ...Total assets ...LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable ...Accrued...

  • Page 64
    ..., net ...(227,705) (250,000) - Excess tax benefits from stock-based awards ...597,118 35,427 125,114 Tax withholdings related to net share settlements of restricted stock awards and restricted stock units ...- (6,456) (76,752) Other financing activities, net ...- (12,126) (74) Net cash (used...

  • Page 65
    ... stock-based awards issued in connection with acquisitions ... $150,859 $1,019,755 $234,626 (8,587) (46,178) (25,430) $142,272 $ - $ 973,577 $ 290,671 $209,196 $ - During the year ended December 31, 2006, the Company contributed its Australian Internet business, Yahoo! Australia and New Zealand...

  • Page 66
    ...connection with business contribution ...29,944 - - Tax benefits from stock-based awards ...626,009 76,138 117,716 Tax withholdings related to net share settlements of restricted stock units ...- (4,466) (49,276) Structured stock... securities, net of tax ...38,018 5,074 (20,017) Foreign currency ...

  • Page 67
    ... 31, 2006 2007 2008 Number of Outstanding Shares (In thousands) Common stock Balance, beginning of year ...Common stock and restricted stock issued ...Repurchases of common stock ...Debt conversions ...Tax withholdings related to net share settlements of restricted stock awards ...Balance, end of...

  • Page 68
    ... to as Affiliate sites, or their other offerings. The Company generates revenues by providing marketing services to advertisers across a majority of Yahoo! Properties and Affiliate sites. Additionally, although many of the services the Company provides to users are free, Yahoo! does charge fees for...

  • Page 69
    ... listing. Marketing services revenues also includes listings and transaction revenues. Listings revenues are generated from a variety of consumer and business listings-based services, including access to the Yahoo! HotJobs database and classified advertising such as Yahoo! Autos, Yahoo! Real Estate...

  • Page 70
    ...number of paid introductions, 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...

  • Page 71
    ... implied volatility calculated based on actively traded options on its common stock is a better indicator of expected volatility and future stock price trends than historical volatility. The assumptions used in calculating the fair value of stock-based awards represent the Company's best estimates...

  • Page 72
    ...' foreign currency translation adjustments. Cash and Cash Equivalents, Short and Long-Term Marketable Debt Securities. The Company invests its excess cash in money market funds and liquid debt instruments of the U.S. Government and its agencies, state municipalities, and in high-quality corporate...

  • Page 73
    ... to Consolidated Financial Statements-(Continued) requirements. A portion of the Company's cash is managed by external managers within the guidelines of the Company's investment policy. The Company's investment policy limits the amount of credit exposure to any one corporate issuer. Yahoo! protects...

  • Page 74
    ... information. Foreign Currency. The functional currency of the Company's international subsidiaries is evaluated on a case-by-case basis and is often the local currency. The financial statements of these subsidiaries are translated into U.S. dollars using period-end rates of exchange for assets...

  • Page 75
    ... and are not expected to have a material impact on the Company's consolidated financial position, cash flows, or results of operations. In May 2008, the FASB issued FSP Accounting Principles Board Opinion ("APB") No. 14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon...

  • Page 76
    ... the if-converted method). In applying the treasury stock method, the Company calculates potential tax windfalls and shortfalls by including the impact of pro forma deferred tax assets. The Company takes into account the effect on consolidated net income per share of dilutive securities of entities...

  • Page 77
    ..."), 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...

  • Page 78
    ... 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 ...Other tangible assets acquired ...Amortizable intangible assets: Customer contracts, related relationships, and developed technology...

  • Page 79
    ...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 and as a result, the Company recorded goodwill in connection with this transaction. Under the terms of the agreement...

  • Page 80
    ... 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 Zimbra and as a result, the Company recorded goodwill in connection with...

  • Page 81
    ...the purchase price of the assets acquired and liabilities assumed based on their fair values was as follows (in thousands): Cash acquired ...Other tangible assets acquired ...Amortizable intangible assets: Customer contracts and related relationships ...Developed technology and patents ...Trade name...

  • Page 82
    ... video and advertising experiences on Yahoo! and the Company's network of video publishers across the Web. The purchase price exceeded the fair value of the net tangible and identifiable intangible assets acquired from Maven and as a result, the Company recorded goodwill in connection with this...

  • Page 83
    ... stock of Alibaba Group Holding Limited ("Alibaba Group"), 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...

  • Page 84
    ... its share of the results of Alibaba Group and any related amortization expense, one quarter in arrears, within earnings in equity interests in the consolidated statements of income. The Company's initial purchase price was based on acquiring a 40 percent equity interest in Alibaba Group on a fully...

  • Page 85
    ...been allocated to in-process research and development. Goodwill is not deductible for tax purposes. The following table presents Alibaba Group's U.S. GAAP financial information, as derived from the Alibaba Group financial statements, which includes summary operating information for the twelve months...

  • Page 86
    ..., whereby Yahoo! Japan Corporation ("Yahoo! Japan") was formed. Yahoo! Japan was formed to establish and manage a local version of Yahoo! in Japan. The fair value of the Company's approximate 34 percent ownership in the common stock of Yahoo! Japan, based on the quoted stock price, was approximately...

  • Page 87
    ...new arrangement, the Company records marketing services revenues from Yahoo! Japan for the provision of search marketing services based on a percentage of advertising revenues earned by Yahoo! Japan for the delivery of sponsored search results. In addition to marketing services revenues, the Company...

  • Page 88
    ... Accumulated Amount Amortization(1) The following table summarizes the Company's carrying amount of intangible assets, net (in thousands): Net(2) Customer, affiliate, and advertiser related relationships ...Developed technology and patents ...Trademark, trade name, and domain name ...Total...

  • Page 89
    ... lives as follows: • Customer, affiliate, and advertiser related relationships-three to eight years; • Developed technology and patents-less than one year to eight years; and • Trademark, trade name, and domain name-one year to indefinite lived. The Company recognized amortization expense of...

  • Page 90
    Yahoo! Inc. Notes to Consolidated Financial Statements-(Continued) Other consists mainly of foreign exchange gains and losses due to re-measurement of assets and liabilities denominated in non-functional currencies. Prepaid expenses and other current assets As of December 31, Prepaid expenses and ...

  • Page 91
    ...): 2007 2008 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 ...Accrued sales and marketing related expenses ...Accrued restructuring...

  • Page 92
    Yahoo! Inc. Notes to Consolidated Financial Statements-(Continued) Gross Amortized Costs December 31, 2008 Gross Gross Unrealized Unrealized Gains Losses Estimated Fair Value U.S. Government and agency securities ...Municipal bonds ...Corporate debt securities ...Corporate equity securities(*) ......

  • Page 93
    ... or liabilities in active markets; inputs other than quoted prices that are observable for the asset or the liability; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. Unobservable inputs reflecting the Company's own assumptions...

  • Page 94
    ... of the Company's Level 1 financial assets are based on quoted market prices of the identical underlying security. The fair value of the Company's Level 2 financial assets are obtained from readily-available pricing sources for the identical underlying security that may not be actively traded. As...

  • Page 95
    Yahoo! Inc. Notes to Consolidated Financial Statements-(Continued) conversion had not been requested by the holders of the Notes, the Company would have had to settle the Notes in cash at maturity. Note 10 INCOME TAXES The components of income before income taxes, earnings in equity ...

  • Page 96
    ... reflects the cumulative tax benefit of a favorable state tax ruling granted in 2008 and retroactive to 2007. The 2007 provision for income taxes reflects the tax benefit related to the release of deferred tax liabilities in connection with changes to the Company's worldwide entity structure in...

  • Page 97
    Yahoo! Inc. Notes to Consolidated Financial Statements-(Continued) During 2008, the Company recorded a deferred tax liability of $276 million in connection with the non-cash gain recorded related to the IPO of Alibaba.com. As of December 31, 2008, the Company's federal and state net operating loss ...

  • Page 98
    ... or group acquires 15 percent or more of the Company's outstanding common stock, holders of the rights (other 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...

  • Page 99
    ... place in the open market or in privately negotiated transactions, including derivative transactions, and may be made under a Rule 10b5-1 plan. Under this program, in the year ended December 31, 2007, the Company repurchased 57.9 million shares of common stock directly at an average price of $27.34...

  • Page 100
    ... employment through the vesting period. Restricted stock award grants are generally measured at fair value 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...

  • Page 101
    ... was terminated due to Mr. Semel's resignation as the CEO of the Company. During 2007, $16 million of stockbased compensation expense recorded in 2007 under this arrangement was reversed due to the forfeitures of equity awards. No similar arrangement existed for the Company's former CEO, Jerry Yang...

  • Page 102
    Yahoo! Inc. Notes to Consolidated Financial Statements-(Continued) Stock option activity under the Company's Plans and Directors' Plan is summarized as follows (in thousands, except years and per share amounts): Weighted Average Weighted Average Remaining Exercise Price per Contractual Life ...

  • Page 103
    ... 32.4% 71.8% 3.75 3.64 3.97 1.25 1.11 1.15 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 U.S. Treasury yield for a term consistent with the expected term of the awards in effect at the time of grant. The...

  • Page 104
    ...-based awards. As a result, in the 2007 statement of cash flows, the Company reduced by $92 million, excess tax benefits from stock-based awards recorded in cash flows from operating activities with an equivalent reduction to the amount of excess tax benefits recorded in cash flows from financing...

  • Page 105
    .... 5) Neither the election of a new Board that is made up of a majority of members who were not members of the Board prior to the election nor a sale of the Company's search business would constitute a Change in Control. Certain changes are not applicable to employees in certain jurisdictions outside...

  • Page 106
    ..., and $61 million will be payable in 2011. Non-cancelable Obligations. The Company is obligated to make payments under various non-cancelable arrangements with vendors and other business partners, principally for marketing, bandwidth, co-location, and content arrangements. As of December 31, 2008...

  • Page 107
    ... 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 the Company's e-mail, message boards, photo and video sites, auction sites, shopping services...

  • Page 108
    ... engaged in a scheme to inflate the Company's stock price by making false and misleading statements regarding the Company's operations, financial results, and future business prospects in violation of Section 10(b) of the Exchange Act and SEC Rule 10b-5. Plaintiffs also allege that the individual...

  • Page 109
    ...in connection with Yahoo!'s consideration of proposals by Microsoft to purchase all or a part of Yahoo!, adoption of severance plans, and the June 12, 2008 agreement between Google Inc. and Yahoo!. The complaint also alleges claims under Section 14(a) of the Exchange Act for alleged false statements...

  • Page 110
    ... whether to grant final approval to the settlement. Pursuant to this order, on December 30, 2008, Yahoo! mailed notice of the proposed settlement and published a summary notice of the proposed settlement. Class members and Yahoo! stockholders had until February 4, 2009 to serve and file any written...

  • Page 111
    ... regarding segments. The following table presents revenues for groups of similar services (in thousands): 2006 Years Ended December 31, 2007 2008 Marketing services: Owned and Operated sites ...Affiliate sites ...Marketing services ...Fees ...Total revenues ...105 $3,074,803 2,552,404 5,627...

  • Page 112
    ...in other assets. Pursuant to the Partnership Agreement, the Company invested on the same terms and on the same basis as all other limited partners. Revenues from related parties, excluding Yahoo! Japan and Alibaba, represented approximately 1 percent of total revenues for the years ended December 31...

  • Page 113
    ...expense reversals for unvested stock awards, resulting in a net restructuring charge of $92 million. The Company incurred pre-tax charges of $82 million for employee severance pay expenses and related cash expenditures in connection with reductions in the Company's global workforce that were made as...

  • Page 114
    ...the Company, replacing Jerry Yang who returned to his former role as Chief Yahoo and remains on the Board. At the same time, the size of the Board was increased from 11 to 12 members and Ms. Bartz was also appointed as a director. On January 13, 2009, the Company entered into an employment agreement...

  • Page 115
    ... and a maximum term of seven years. The option becomes exercisable, if at all, based on the attainment of average closing prices for the Company's common stock as reported on the NASDAQ Global Select Market for 20 consecutive trading days (except in certain circumstances) prior to January 1, 2013 as...

  • Page 116
    ... to Net of, Expenses Recoveries (In thousands) Balance at End of Year Accounts receivable Allowance for doubtful accounts 2006 ...2007 ...2008 ... $ 41,857 38,196 46,521 $ 5,... excess tax benefits from stock-based awards and their related valuation allowance, in connection with the adoption of SFAS ...

  • Page 117
    ... share calculation- diluted ...1,418,225 1,403,819 (1) 1,335,092 1,328,784 1,333,730 1,372,629 1,383,786 1,387,758 1,395,056 1,396,306 1,395,416 1,399,277 1,397,573 1,387,758 Net income for the quarter ended March 31, 2008 includes a non-cash gain of $401 million related to Alibaba Group...

  • Page 118
    ...percent to 200 percent based on Yahoo!'s operating cash flow (as defined in the EIP) results for that year as a percentage of an operating cash flow target set by the Compensation Committee for the year. An individual participant's bonus will be based 70 percent on Company performance and 30 percent...

  • Page 119
    ... who were named in the Summary Compensation Table of the Company's Proxy Statement filed with the SEC on June 9, 2008 and are currently employed by the Company: Name and Principal Position 2009 Target Bonus (% of Base Salary) Carol Bartz Chief Executive Officer Jerry Yang Chief Yahoo Susan Decker...

  • Page 120
    ...120 days after the end of the fiscal year ended December 31, 2008. Item 14. Principal Accountant Fees and Services The information required by this item is incorporated by reference to Yahoo!'s Proxy Statement for its 2009 Annual Meeting of Stockholders to be filed with the SEC within 120 days after...

  • Page 121
    ...Exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, hereby ratifying and confirming ...Financial Officer (Principal Financial Officer) Senior Vice President, Finance and Chief Accounting Officer (Principal Accounting Officer) Chairman of the Board...

  • Page 122
    ... KERN Arthur Kern Director February 27, 2009 /S/ MARY AGNES WILDEROTTER Mary Agnes Wilderotter Director February 27, 2009 /S/ GARY WILSON Gary Wilson Director February 27, 2009 /S/ JERRY YANG Jerry Yang Director February 27, 2009 116

  • Page 123
    ...exhibit index immediately precedes the exhibits. Exhibit Number Description 2.1 Stock Purchase and Contribution Agreement, dated as of August 10, 2005, by and between Yahoo! Inc. and Alibaba.com Corporation (Filed as Exhibit 2.1 to the Registrant's Current Report on Form 8-K, filed August 16, 2005...

  • Page 124
    ...Unit Award Agreement (TSR version) under Yahoo! Inc. Amended and Restated 1995 Stock Plan. Form of Executive Incentive Performance Restricted Stock Unit Award Agreement (OCF version) under Yahoo! Inc. Amended and Restated 1995 Stock Plan. Yahoo! Inc. Amended and Restated 1996 Employee Stock Purchase...

  • Page 125
    ... No. 2 to Yahoo! Japan License Agreement dated January 31, 2005 by and between the Registrant and Yahoo! Japan Corporation (Filed as Exhibit 10.30 to the December 31, 2004 10-K and incorporated herein by reference.) Summary of Compensation Payable to Named Executive Officers. Offer Letter, dated as...

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    ... 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, Carol Bartz, certify that: 1. 2. I have reviewed this Form 10-K of Yahoo! Inc.; Based on my knowledge, this report does not contain any untrue statement of...

  • Page 128
    ... 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. 2. I have reviewed this Form 10-K of Yahoo! Inc.; Based on my knowledge, this report does not contain any untrue statement of...

  • Page 129
    ... of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Name: Title: Dated: CAROL BARTZ Carol Bartz Chief Executive...

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  • Page 131
    ...Vice President, Service Engineering & Operations TRANSFER AGENT Computershare Trust Company, N.A. P.O. Box 43078 Providence, RI 02940-3078 Ron Burkle Founder and Managing Partner, The Yucaipa Companies David Filo Co-founder and Chief Yahoo YAHOO! INVESTOR RELATIONS 701 First Avenue Sunnyvale, CA...

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