Yahoo 2010 Annual Report Download - page 42

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Facilities and Other Expenses. Facilities and other expenses decreased $121 million for the year ended
December 31, 2010, compared to 2009 mainly due to decreases in restructuring charges of $69 million, third-
party service-provider expenses of $45 million, and decreases in legal settlements of $21 million, offset by
increases in marketing expenses of $33 million. For the year ended December 31, 2010, we recorded total cost
reimbursements from Microsoft of $93 million for other costs, for which there were no similar reimbursements in
2009. For the year ended December 31, 2010, the net impact of the reimbursements by Microsoft for our cost of
running search and transition costs incurred in 2009 was a reduction in facilities and other expenses of $73
million compared to 2009. Third-party service-provider expenses decreased primarily due to lower advisory and
consulting costs. Marketing-related expenses increased during the year ended December 31, 2010 compared to
2009 due to additional 2010 marketing campaigns including our global branding campaign.
Facilities and other expenses decreased $730 million for the year ended December 31, 2009, compared to 2008
mainly due to decreases of $488 million related to the goodwill impairment charge recorded in 2008 for which
there was no comparable charge in 2009, decreases in third-party service-provider expenses of $117 million,
decreases in content costs of $57 million, and decreases in employee travel and entertainment costs of $39
million. Decreases in third-party service-provider expenses were primarily due to higher advisor costs incurred in
2008 related to Microsoft’s proposal to acquire all or a part of Yahoo!, other strategic alternatives, including the
Google agreement, the proxy contest, and related litigation defense, compared to advisory and employee
retention costs incurred in 2009 in connection with the Microsoft search arrangement. The decreases in third-
party service provider expenses were also due to a decrease in temporary headcount and consulting projects
related to our cost initiatives in 2009. Content costs, included in costs of revenue and driven by our rich media
offerings, decreased due to lower content costs for various properties as we transition out of and/or outsource
certain business lines.
We currently expect our operating costs to decrease for the first quarter of 2011, compared to the same period of
2010, primarily due to lower workforce expenses driven by restructuring activities and higher marketing
expenses in 2010 than 2011 as we continue our efforts to drive efficiencies and align our spending with our
strategic priorities.
Restructuring Charges, Net. For the years ended December 31, 2008, 2009, and 2010, restructuring charges, net
was comprised of the following (in thousands):
Years Ended December 31,
2008 2009 2010
Employee severance pay and related costs ....................................... $109,548 $ 48,696 $39,652
Non-cancelable lease, contract terminations, and other charges ....................... 19,617 59,285 19,737
Other non-cash charges ...................................................... 7,925 7,858 2,779
Sub-total before (reversals) accelerations of stock-based compensation expense ..... 137,090 115,839 62,168
(Reversals) accelerations of stock-based compensation expense ...................... (30,236) 11,062 (4,211)
Restructuring charges, net ................................................ $106,854 $126,901 $57,957
Q108 Restructuring Plan. During the first quarter of 2008, we implemented a strategic workforce realignment to
more appropriately allocate resources to our key strategic initiatives. The strategic workforce realignment
involved investing resources in some areas, reducing resources in others, and eliminating some areas of our
business that did not support our strategic priorities. During the year ended December 31, 2008, we incurred total
pre-tax charges of approximately $27 million in severance pay expenses and related cash expenses in connection
with this workforce realignment, net of reversal for adjustments to original estimates totaling $2 million. The
pre-tax cash charges were offset by a $12 million credit related to non-cash stock-based compensation expense
reversals for unvested stock awards that were forfeited. Of the net estimated total strategic workforce realignment
pre-tax expense of approximately $15 million, $12 million was related to the Americas segment and $3 million
was related to the EMEA segment. As of December 31, 2008, there was no remaining restructuring accrual
related to the strategic workforce realignment.
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