Yahoo 2008 Annual Report Download - page 44

average headcount, primarily in the product development function (partially offset in 2008 by decreased
headcount in certain functions, primarily sales and marketing), as well as annual salary increases and higher base
salaries across all functions. Product development headcount increased for the maintenance and development of
and minor enhancements to existing offerings and services on Yahoo! Properties as well as the maintenance of
Yahoo!’s technology platforms and infrastructure. For 2008, the increase in compensation expense was net of a
decrease in stock-based compensation of $165 million, primarily due to $30 million in reversals of stock-based
compensation expense related to employee departures (including the departure of executives) in 2008 as
compared to 2007 and reversals of $51 million of stock-based compensation expense to reflect an increase in
estimated forfeiture rate assumptions related to equity awards for which there were no similar reversals in 2007.
We do not expect our headcount to continue to grow at its historic rate.
Information Technology Expenses. Information technology expenses increased $66 million for the year ended
December 31, 2008, as compared to 2007. Information technology expenses increased $51 million for the year
ended December 31, 2007, as compared to 2006. The increases for both years are due to increased telecom usage
and data center operating costs.
Depreciation and Amortization Expenses. Depreciation and amortization expenses increased $131 million for the
year ended December 31, 2008, as compared to 2007. Depreciation and amortization expenses increased
$119 million for the year ended December 31, 2007, as compared to 2006. The increases were due to our
continued investment in information technology assets and server equipment. These increases were slightly offset
by a decrease in amortization expense for acquired intangible assets due to certain intangible assets acquired in
prior years being fully amortized as well as an increase in the weighted amortization periods of recently acquired
intangible assets.
Facilities Expenses. Facilities expenses increased $14 million for the year ended December 31, 2008, as
compared to 2007. Facilities expenses increased $32 million for the year ended December 31, 2007, as compared
to 2006. The increases were due to our expansion into new facilities and increased rent expense on our buildings.
Due to our cost reduction initiatives, we do not expect our facilities expenses to continue to grow at its historic
rate.
TAC. TAC decreased $47 million for the year ended December 31, 2008, as compared to 2007. TAC decreased
$9 million for the year ended December 31, 2007, as compared to 2006. The decreases were primarily due to the
sale of Overture Japan to Yahoo! Japan. The decrease in TAC was slightly offset by a small increase in average
TAC rates and partner mix changes.
Other Expenses. Other expenses increased $703 million for the year ended December 31, 2008, as compared to
2007 mainly due to restructuring charges, net of $107 million, the goodwill impairment charge of $488 million,
and increases in third-party service provider expenses of $125 million. For the year ended December 31, 2008,
the increases in outsourced 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, the proxy
contest, and related litigation defense costs. Other expenses increased $72 million for the year ended
December 31, 2007, as compared to 2006, mainly due to increases in outsourced service provider expenses of
$49 million. For the year ended December 31, 2007, the increases were primarily the result of incremental costs
incurred for increased temporary headcount and consulting projects.
Restructuring Charges, Net. Restructuring charges of $137 million excluding the reversals of stock-based
compensation, for the year ended December 31, 2008 consisted of $27 million for the strategic workforce
realignment initiated in the first quarter of 2008 and $110 million relating to the cost reduction initiatives
implemented in the fourth quarter of 2008. These restructurings were comprised of two initiatives:
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