Yahoo 2009 Annual Report Download - page 40

Cash provided by operating activities is a measure of the cash productivity of our business model. Our operating
activities in 2009 generated adequate cash to meet our operating needs. Cash used in investing activities in the
year ended December 31, 2009 included capital expenditures of $434 million, net acquisitions of $195 million,
and net purchases of marketable debt securities of $2 billion, offset by $265 million of proceeds received from
the sales of marketable equity securities. Cash provided by financing activities included $113 million in proceeds
from employee option exercises and employee stock purchases, offset by $113 million used in the direct
repurchase of common stock and $73 million used for tax withholding payments related to the net share
settlements of restricted stock units and tax withholding-related reacquisition of shares of restricted stock. Net
cash provided by operating activities during the year ended December 31, 2008 included a $350 million one-time
payment related to a commercial arrangement entered into with AT&T Inc. No similar payments were received
during the year ended December 31, 2009.
During May of 2009, we sold all of our Gmarket shares for net proceeds of $120 million and recorded a pre-tax
gain of $67 million ($42 million after tax) in connection with the sale. In September of 2009, we sold our direct
investment in Alibaba.com for net proceeds of $145 million and recorded a pre-tax gain of $98 million ($60
million, after tax) in connection with the sale.
During 2009, we implemented cost initiatives that reduced our worldwide workforce by approximately 5 percent
and reallocated resources to align with our strategic priorities including investing resources in some areas,
reducing resources in others, and eliminating some areas of our business that do not support our strategic
priorities. In connection with these initiatives, we incurred severance, facility, and other restructuring costs of
$61 million. In addition, we recorded $66 million of restructuring costs relating to the 2008 restructuring plans
during 2009.
Search and License Agreement with Microsoft
On December 4, 2009, Yahoo! entered into a Search Agreement and a License Agreement with Microsoft under
which Microsoft will be Yahoo!’s exclusive platform technology provider for algorithmic and paid search
services and non-exclusive provider for contextual advertising. Under the Search Agreement, Yahoo! will
become the exclusive worldwide relationship sales force for both companies’ premium search advertisers, which
include advertisers meeting certain spending or other criteria, advertising agencies that specialize in or offer
search engine marketing services and their clients, and resellers and their clients seeking assistance with their
paid search accounts. The term of the Search Agreement is 10 years after the parties commence performance
under the agreement, subject to earlier termination as provided in the Search Agreement. Under the License
Agreement, Microsoft will acquire an exclusive 10-year license to Yahoo!’s core search technology and will
have the ability to integrate this technology into its existing Web search platforms. The parties commenced
implementation of the Search Agreement on February 23, 2010.
During the first five years of the term of the Search Agreement, we will be entitled to receive 88% of the net
revenues generated from Microsoft’s services on Yahoo! Properties (the “Revenue Share Rate”) and we will also
be entitled to receive our share (at the Revenue Share Rate) of the net revenues generated from Microsoft’s
services on Affiliate sites after the Affiliate’s share of net revenues is deducted. For new Affiliates during the
term of the Search Agreement, and for all Affiliates after the first five years of such term, we will receive our
share (at the Revenue Share Rate) of the net revenues generated from Microsoft’s services on Affiliate sites after
the Affiliate’s share of net revenues and certain Microsoft costs are deducted. On the fifth anniversary of the date
of implementation of the Search Agreement, Microsoft will have the option to terminate our sales exclusivity for
premium search advertisers. If Microsoft exercises its option, the Revenue Share Rate will increase to 93% for
the remainder of the term of the Search Agreement, unless Yahoo! exercises its option to retain its sales
exclusivity, in which case the Revenue Share Rate would be reduced to 83% for the remainder of the term. If
Microsoft does not exercise such option, the Revenue Share Rate will be 90% for the remainder of the term of the
Search Agreement.
32