Yahoo 2011 Annual Report Download

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Annual Report 2011

Table of contents

  • Page 1
    Annual Report 2011

  • Page 2

  • Page 3
    ... company (as defined by Rule 12b-2 of the Exchange Act). Yes ' No Í As of June 30, 2011, the aggregate market value of voting stock held by non-affiliates of the Registrant, based upon the closing sales price for the Registrant's common stock, as reported on the NASDAQ Global Select Market, was...

  • Page 4
    ... limited to, Yahoo!, Y!, IntoNow, interclick, Livestand, Flickr, Right Media, omg!, Shine, Sportacular, Prime Time in No Time, Behind Enemy Lines, Ready Set Dance, Yahoo! Search BOSS, Wretch, Meme from Yahoo!, Citizen Sports, Associated Content and their respective logos. Other names are trademarks...

  • Page 5
    ... of marketing services designed to reach and connect with those users on Yahoo! and through a distribution network of third-party entities ("Affiliates"). These Affiliates integrate our advertising offerings into their Websites or other offerings (those Websites and other offerings, "Affiliate sites...

  • Page 6
    ... access photo and video information from their connections. In addition, the latest version of Yahoo! Mail offers a consistent experience across devices, whether on desktop, mobile devices such as the iPhone or Android smart phones, or tablets. • Launched Yahoo! Messenger 11, which offers users...

  • Page 7
    ...other devices such as PCs, mobile phones, tablets and TVs. Communications and Communities Our Communications and Communities offerings, including Yahoo! Mail, Yahoo! Messenger, Yahoo! Groups, Yahoo! Answers, Flickr, and Connected TV, provide a wide range of communication and social services to users...

  • Page 8
    ... service, Flickr offers a fee-based service with unlimited storage, uploads, and an advertising-free browsing and sharing interface. Yahoo! offers mobile applications for Flickr, on both iPhone and Android devices. Connected TV enhances the TV viewing experience through an open, interactive platform...

  • Page 9
    ... from listing fees and premium location targeted display advertising. Marketplaces Our Marketplaces offerings and services include Yahoo! Shopping, Yahoo! Travel, Yahoo! Real Estate, Yahoo! Autos, and Yahoo! Small Business. On these properties, users can research specific topics, products, services...

  • Page 10
    ...audiences and premium content on the Web. We do this by bringing quality publishers together through Yahoo! Network Plus (including AT&T, Verizon, Rogers, Monster, and Comcast) and the Right Media Exchange. The Right Media Exchange is Yahoo!'s ad platform for digital advertising companies, including...

  • Page 11
    ... the experiences rendered with a set of application programming interfaces ("APIs") and tools for ease of doing business. With this offering, publishers are able to participate in the Yahoo! Search and Bing Unified Search Marketplaces as well as the Right Media Exchange for display advertising. We...

  • Page 12
    Yahoo! Search BOSS is an open search Web services platform that enables developers, start-ups, and large Internet companies to build Web-scale search products. Yahoo!'s Social API suite offers advertisers and users the power of the Yahoo! network and all its inherent social connections. The social ...

  • Page 13
    ...to promote or distribute our services to their users. In addition, we compete with advertising networks, exchanges, demand side platforms and other platforms, such as Google AdSense, DoubleClick Ad Exchange, AOL's Ad.com and Microsoft Media Network, as well as traditional media companies for a share...

  • Page 14
    ...! Products. These elements include the user data base and login, video and social connection platforms. Our engineering and production teams are primarily located in our Sunnyvale, California headquarters, Bangalore, India, and Beijing, China. Product development expenses for 2009, 2010, and 2011...

  • Page 15
    ... INFORMATION Our Website is located at http://www.yahoo.com. Our investor relations Website is located at http://investor.yahoo.net. We make available free of charge on our investor relations Website under "SEC Filings" our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports...

  • Page 16
    ...increasing share of online advertising dollars. In addition, several competitors offer products and services that directly compete for users with our offerings, including consumer e-mail, local search, instant messaging, daily deals, photos, maps, video sharing, content channels, mobile applications...

  • Page 17
    ... product development, build data centers or acquire real property, and acquire and integrate complementary businesses and technologies. Our operating costs might also increase if we do not effectively manage costs as we transition markets under the Search Agreement and reimbursements from Microsoft...

  • Page 18
    ...- in order to continue to attract, retain, and expand our user base and paid search advertiser base. We currently deploy our own technology to provide algorithmic Web search and paid search results on our network, except in markets where we have transitioned those services to Microsoft's platform...

  • Page 19
    ...the content and services on our online properties, such as news items, stock quotes, weather reports, music videos, music radio, and maps. We believe that users will increasingly demand high-quality content and services, including music videos, film clips, news footage, and special productions. Such...

  • Page 20
    ... to, advertising, marketing, and other brand-building efforts to preserve and enhance consumer awareness of our brands. Our brands may be negatively impacted by a number of factors, including among other issues: service outages; product malfunctions; data privacy and security issues; exploitation...

  • Page 21
    ... of content or search results triggered by search terms, including the display of advertising, that include trademark terms. Currently, we are engaged in lawsuits regarding such intellectual property issues. As we expand our business and develop new technologies, products and services, we may become...

  • Page 22
    ...use, sharing or security of personal information, or other privacy, data-retention or data-protection matters could result in a loss of user confidence in us, damage to the Yahoo! brands, and ultimately in a loss of users, advertising partners, or Affiliates which could adversely affect our business...

  • Page 23
    ... information in order to gain access to our data or our users' or customers' data. We must continuously examine and modify our security controls and business policies to adapt to the rise of social networking, the adoption of new devices and technologies enabling users to share data and communicate...

  • Page 24
    ...any information provided 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...

  • Page 25
    ... number of products, services, page views, and advertising impressions to users around the world. The products and services offered by us are expected to continue to expand and change significantly and rapidly in the future to accommodate new technologies and Internet advertising solutions...

  • Page 26
    ...-party Websites, online networks, software companies, electronics companies, computer manufacturers, and others to promote or supply our services to their users. For example: • We maintain search and display advertising relationships with Affiliate sites, which integrate our advertising offerings...

  • Page 27
    ... in order to present a similar user-experience on the new devices. The content providers may not be willing to enter into such new or amended agreements on reasonable terms or at all. We offer versions of many of our popular services (such as sports, finance, and news) designed to be accessed on...

  • Page 28
    ... a large number of varying foreign operations as a result of distance, language, and cultural differences; • stringent local labor laws and regulations; • longer payment cycles; • credit risk and higher levels of payment fraud; • profit repatriation restrictions and foreign currency exchange...

  • Page 29
    ... of our revenue is derived from fees paid by advertisers in connection with the display of graphical advertisements or clicks on search advertisements on Web pages. As a result, such technologies and tools could reduce the number of display and search advertisements that we are able to deliver or...

  • Page 30
    ...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 31
    ... decrees, or orders preventing us from offering certain features, functionalities, products, or services, or requiring a change in our business practices, products or technologies, which could in the future materially and adversely affect our business, operating results, and financial condition...

  • Page 32
    ... year ended December 31, 2011, the closing sale price of our common stock on the NASDAQ Global Select Market ranged from $11.09 to $18.65 per share and the closing sale price on February 17, 2012 was $15.01 per share. Our stock price may fluctuate in response to a number of events and factors, such...

  • Page 33
    ... Properties Our headquarters is located in Sunnyvale, California and consists of owned and leased space aggregating approximately 1.4 million square feet. We also lease office space in Argentina, Australia, Belgium, Brazil, Canada, China, Egypt, France, Germany, Hong Kong, Hungary, India, Indonesia...

  • Page 34
    ... 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 reported for each period indicated: 2010 High...

  • Page 35
    ... at the market close on December 29, 2006 in the common stock of Yahoo!, the NASDAQ 100 Index, the SPGIINTR, and the S&P 500 Index and assumes reinvestment of any dividends. The stock price performance on the following graph is not necessarily indicative of future stock price performance. $160...

  • Page 36
    ... required a change in revenue presentation and a sharing of search revenue with Microsoft in transitioned markets. Our net income attributable to Yahoo! Inc. for the year ended December 31, 2010 included a pre-tax gain of $66 million in connection with the sale of Zimbra, Inc. and a pre-tax gain on...

  • Page 37
    (4) Our revenue declined in 2011 due to the Search Agreement with Microsoft, which beginning during the fourth quarter of 2010 required a change in revenue presentation and a sharing of search revenue with Microsoft in transitioned markets. Our net income attributable to Yahoo! Inc. for the year ...

  • Page 38
    ... of marketing services designed to reach and connect with those users on Yahoo! and through a distribution network of third-party entities ("Affiliates"). These Affiliates integrate our advertising offerings into their Websites or other offerings (those Websites and other offerings, "Affiliate sites...

  • Page 39
    ...generated from Microsoft's services on Yahoo! Properties and Affiliate sites, we report as revenue the 88 percent revenue share, as we are not the primary obligor in the arrangement with the advertisers and publishers. Under the Search Agreement, for each market, Microsoft generally guarantees Yahoo...

  • Page 40
    ... display advertising service. We recognize revenue from search advertising on Yahoo! Properties and Affiliate sites. Search revenue is recognized based on "click-throughs". A "click-through" occurs when a user clicks on an advertiser's search result listing. Under the Search Agreement with Microsoft...

  • Page 41
    ... fee-based services, including Internet broadband services, royalties received from joint venture partners, and premium mail, as well as services for small businesses. We recognize fees revenue when the services are performed. 2011 Highlights Operating Highlights Years Ended December 31, 2010 2011...

  • Page 42
    ...guaranteed display inventory available through our Right Media Exchange. To assist us in evaluating display advertising and search advertising, beginning in the fourth quarter of 2010 we began reporting the number of Web pages viewed by users ("Page Views") separately for display and search. "Search...

  • Page 43
    ... access partnerships, our shift from a fee-paying user structure to other fee structures, and to the divestiture of certain business lines during the year ended December 31, 2010. In addition, revenue from other premium services declined year-over-year as we continue to outsource various offerings...

  • Page 44
    ... stock-based compensation expense. TAC. TAC consist of payments made to third-party entities that have integrated our advertising offerings into their Websites or other offerings and payments made to companies that direct consumer and business traffic to Yahoo! Properties. We enter into agreements...

  • Page 45
    ... in the development of our technology platform and specific products. The decrease in stock-based compensation expense is primarily due to increased cancellations for stock options and increased forfeitures for stock-based awards in the year ended December 31, 2011, compared to 2010. The decline...

  • Page 46
    ... of 2010 due to the Search Agreement with Microsoft as we no longer incur TAC for transitioned markets. We now receive an 88 percent revenue share in the transitioned markets as Microsoft is the primary obligor to the advertisers. In addition, the decrease in TAC for the year ended December 31, 2011...

  • Page 47
    ... with observable credit spreads of companies with similar credit standing. The cost of exiting and terminating our facility leases was determined by referring to the contractual terms of the agreements, by evaluating the current real estate market conditions, and, where applicable, by referring...

  • Page 48
    ... million in severance and other costs related to this workforce reduction in the fourth quarter of 2010. The pre-tax cash charges were offset by a $4 million credit related to non-cash stock-based compensation expense reversals for unvested stock awards that were forfeited. Of the $37 million in net...

  • Page 49
    .../losses from sales or impairments of marketable debt securities and/or investments in privately-held companies, and other non-operating items. Other income, net may fluctuate in future periods due to changes in our average investment balances, changes in interest and foreign exchange rates, changes...

  • Page 50
    ...(1) 2010 (1) 2011 (1) Income tax at the U.S. federal statutory rate of 35 percent ...State income taxes, net of federal benefit ...Change in valuation allowance ...Stock-based compensation expense ...Research tax credits ...Effect of non-U.S. operations ...Resolution with tax authorities ...Tax...

  • Page 51
    .... Noncontrolling interests recorded in 2011, 2010, and 2009, were mainly related to the Yahoo! 7 venture in Australia. Business Segment Results We manage our business geographically. The primary areas of measurement and decision making are the Americas, EMEA (Europe, Middle East and Africa) and Asia...

  • Page 52
    ... Agreement as well as declines in our Affiliate search revenue as a result of the Microsoft transition. Display revenue ex-TAC decreased due to declines in guaranteed advertising. Other revenue decreased due to changes in certain of our broadband access partnerships, a shift from a fee-paying user...

  • Page 53
    ..., compared to 2010. The increase in Asia Pacific revenue ex-TAC were primarily driven by an increase in our display advertising business, fee-based services and the favorable effects of foreign currency exchange rate fluctuations. For the year ended December 31, 2011, direct costs attributable to...

  • Page 54
    ...and execute a Search and Advertising Services and Sales Agreement and a License Agreement. • September 2009-Sold our direct investment in Alibaba.com for net proceeds of $145 million. • November 2009-Acquired Maktoob, a leading online portal in the Middle East, for a total purchase price of $164...

  • Page 55
    ... on available-for-sale securities are reported in other income, net. The fair value for securities is determined based on quoted market prices of the historical underlying security or from readily available pricing sources for the identical underlying securities that may not be actively traded as of...

  • Page 56
    ... in 2009, $714 million in 2010, and $593 million in 2011. Our capital expenditures have been primarily used for purchases and internal development of software to support our offerings and our increased number of users as well as the build out of our owned and operated data centers. We invested a net...

  • Page 57
    ... are generally comprised of purchases of computer hardware, software, server equipment, furniture and fixtures, and real estate. Capital expenditures, net were $593 million in 2011, compared to $714 million in 2010 and $434 million in 2009. Our capital expenditures in 2012 are expected to be...

  • Page 58
    ...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 of December 31, 2011, unrecognized tax benefits...

  • Page 59
    ... revenue is generated from the display of text-based links to an advertiser's Website and from revenue sharing arrangements with partners for search technology and services. Other revenue consists of listings-based services revenue, transaction revenue, and fees revenue. While the majority of our...

  • Page 60
    ... estimated future cash flows, and discount rates. These components are discussed below: • Market comparables We select comparable companies in the specific regions in which our reporting units operate based on similarity of type of business, primarily those involved in online advertising, relative...

  • Page 61
    ... expense for those shares expected to vest. We estimate this forfeiture rate based on historical experience of our stock-based awards that are granted and cancelled before vesting. If our actual forfeiture rate is materially different from our original estimates, the stock-based compensation expense...

  • Page 62
    ...-for-sale debt securities as of December 31, 2011 and 2010, respectively. Foreign Currency Exposure. Our foreign currency exposure continues to increase as we grow internationally. The objective of our foreign exchange risk management program is to identify material foreign currency exposures...

  • Page 63
    ... 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, the translation of these foreign currencydenominated transactions results in reduced consolidated revenue and operating expenses. Conversely...

  • Page 64
    ... stock market and the industries in which these companies participate. Our investments in available-for-sale equity securities were immaterial as of December 31, 2011 and 2010, respectively. Our realized gains and losses from the sale of available-for-sale equity securities were not material in 2011...

  • Page 65
    ... 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, 2011 ...Consolidated Balance Sheets as of December 31, 2010 and 2011 ...Consolidated Statements of...

  • Page 66
    ... respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on criteria established...

  • Page 67
    ... share-basic ...Net income attributable to Yahoo! Inc. common stockholders per share-diluted ...Shares used in per share calculation-basic ...Shares used in per share calculation-diluted ...Stock-based compensation expense by function: ...Cost of revenue ...Sales and marketing ...Product development...

  • Page 68
    Yahoo! Inc. Consolidated Balance Sheets December 31, 2010 2011 (In thousands, except par values) ASSETS Current assets: Cash and cash equivalents ...Short-term marketable debt securities ...Accounts receivable, net of allowance of $22,975 and $30,142 as of December 31, 2010 and 2011, respectively ...

  • Page 69
    ... of common stock ...Excess tax benefits from stock-based awards ...Tax withholdings related to net share settlements of restricted stock awards and restricted stock units ...Other financing activities, net ...Net cash provided by (used in) financing activities ...Effect of exchange rate changes on...

  • Page 70
    ... 2010 2011 (In thousands) Common stock Balance, beginning of year ...Common stock issued (retired), net ...Balance, end of year ...Additional paid-in capital Balance, beginning of year ...Common stock and stock-based awards issued ...Stock-based compensation expense ...Tax benefits from stock-based...

  • Page 71
    ... net income, net of taxes of $(10,060), $116, and $(648) for 2009, 2010, and 2011, respectively ...Net change in unrealized (losses) gains on available-for-sale securities, net of tax ...Foreign currency translation adjustment, net of tax ...Other comprehensive income ...Comprehensive income ...Less...

  • Page 72
    ... online properties and services ("Yahoo! Properties") to users as well as a range of marketing services designed to reach and connect with those users on Yahoo! and through a distribution network of third-party entities ("Affiliates"). These Affiliates integrate the Company's advertising offerings...

  • Page 73
    ... and Affiliate sites. Search revenue is recognized based on "click-throughs." A "click-through" occurs when a user clicks on an advertiser's search result listing. The Company has entered into a Search and Advertising Services and Sales Agreement (the "Search Agreement") with Microsoft, which...

  • Page 74
    ... Company's advertising offerings into their Websites or other offerings and payments made to companies that direct consumer and business traffic to Yahoo! Properties. The Company enters into agreements of varying duration that involve TAC. There are generally two economic structures of the Affiliate...

  • Page 75
    ... shares expected to vest. The Company estimates the forfeiture rate based on historical experience of the Company's stock-based awards that are granted and cancelled before vesting. If the Company's actual forfeiture rate is materially different from the Company's original estimate, the stock-based...

  • Page 76
    ... as current assets. Investments with maturities greater than 12 months from the balance sheet date are classified as long-term assets. The Company's marketable debt and equity securities are classified as available-for-sale and are reported at fair value, with unrealized gains and losses, net of tax...

  • Page 77
    ..., of stock-based compensation expense in the years ended December 31, 2009, 2010, and 2011. Goodwill. Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired in a business combination. Goodwill is not amortized, but is tested for...

  • Page 78
    ... specific 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...

  • Page 79
    ... to participating securities (restricted stock awards granted under the Company's 1995 Stock Plan and restricted stock units granted under the 1996 Directors' Stock Plan (the "Directors' Plan")). Diluted net income per share is computed using the weighted average number of common shares and, if...

  • Page 80
    ... per share of dilutive securities of entities in which the Company holds equity interests that are accounted for using the equity method. For 2009, 2010, and 2011, potentially dilutive securities representing approximately 122 million, 80 million, and 56 million shares of common stock, respectively...

  • Page 81
    ... would accelerate the Company's growth in the Middle East through Maktoob's existing strong position in the region and the ability to deliver users a compelling local experience by combining Maktoob's experienced team with Yahoo!'s scalable technology and products. The purchase price exceeded the...

  • Page 82
    ...unvested options and restricted stock awards were assumed. Assumed options are exercisable for shares of Yahoo! common stock. The total purchase price of $259 million consisted of cash consideration. In connection with the acquisition, the Company issued stock-based awards valued at $9 million which...

  • 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
    ... tax, of $350 million and $440 million, respectively as of December 31, 2010 and 2011. The Company also has commercial arrangements with Alibaba Group to provide technical, development, and advertising services. For the years ended December 31, 2010 and 2011, these transactions were not material. 82

  • Page 85
    ... of Alibaba Group designated by Yahoo! and Softbank. (3) Alibaba Group has licensed to Alipay certain intellectual property and technology and perform certain software technology services for Alipay and in return Alipay pays to Alibaba Group a royalty and software technology services fee, which...

  • Page 86
    ...results of the Yahoo Japan investee. The fair value of the Company's approximate 35 percent ownership in the common stock of Yahoo Japan, based on the quoted stock price, was approximately $6 billion as of December 31, 2011. As of December 31, 2010 and 2011, the Company's ownership interest in Yahoo...

  • Page 87
    ... of December 31, 2010 and 2011, respectively. Under technology and trademark license and other commercial arrangements with Yahoo Japan, the Company records revenue from Yahoo Japan based on a percentage of revenue earned by Yahoo Japan. The Company recorded revenue from Yahoo Japan of approximately...

  • Page 88
    ... the Company's carrying amount of intangible assets, net (in thousands): December 31, 2010 Gross Carrying Accumulated Amount Amortization(*) Net Customer, affiliate, and advertiser related relationships ...Developed technology and patents ...Trade names, trademarks, and domain names ...Total...

  • Page 89
    ... on sales of marketable equity securities include gains from sales of publicly traded companies. In May 2009, the Company sold all of its Gmarket shares for net proceeds of $120 million and recorded a pre-tax gain of $67 million. In September 2009, the Company sold its direct investment in Alibaba...

  • Page 90
    ... (in thousands): 2010 2011 Accrued content, connection, traffic acquisition, and other costs ...Deferred income taxes (Note 9) ...Accrued compensation and related expenses ...Accrued taxes payable ...Accrued professional service expenses ...Accrued sales and marketing related expenses ...Accrued...

  • Page 91
    ... 2011 Reported as: Short-term marketable debt securities ...Long-term marketable debt securities ...Other assets ...Total ... $1,357,661 744,594 1,469 $2,103,724 $493,189 474,338 783 $968,310 Available-for-sale securities included in cash and cash equivalents on the consolidated balance sheets...

  • Page 92
    ... due to a deterioration of the credit quality of the issuer. The longer the term of the securities, the more susceptible they are to changes in market rates. Investments are reviewed periodically to identify possible other-than-temporary impairment. The Company has no current requirement or intent...

  • Page 93
    ...Level 3 The following table sets forth the financial assets, measured at fair value, by level within the fair value hierarchy as of December 31, 2010 (in thousands): Assets Fair Value Measurements at Reporting Date Using Level 1 Level 2 Total Money market funds(1) ...Available-for-sale securities...

  • Page 94
    ... consolidated balance sheet. (2) (3) The amount of cash and cash equivalents as of December 31, 2011 includes $1.1 billion in cash deposited with commercial banks, of which $217 million are time deposits. The fair values of the Company's Level 1 financial assets are based on quoted market prices...

  • Page 95
    ... 31, 2009 2010 2011 Income tax at the U.S. federal statutory rate of 35 percent ...State income taxes, net of federal benefit ...Change in valuation allowance ...Stock-based compensation expense ...Research tax credits ...Effect of non-U.S. operations ...Resolution with tax authorities ...Tax gain...

  • Page 96
    ... for financial reporting purposes and the amounts used for income tax purposes. The components of deferred income tax assets and liabilities are as follows (in thousands): December 31, 2010 2011 Deferred income tax assets: Net operating loss and tax credit carryforwards ...Stock-based compensation...

  • Page 97
    ...recorded on the Company's consolidated balance sheets as follows (in thousands): December 31, 2010 2011 Total unrecognized tax benefits balance ...Amounts netted against related deferred tax assets ...Unrecognized tax benefits recorded on consolidated balance sheets ...Amounts classified as accrued...

  • Page 98
    ... average price of $14.75 per share. As of December 31, 2011, the June 2010 program had remaining authorized purchase capacity of $605 million. During the year ended December 31, 2010, the Company had repurchased and retired 335 million shares, resulting in reductions of $0.3 million in common stock...

  • Page 99
    ... years). 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. The 1995 Stock Plan provides for...

  • Page 100
    ... 31, 2009, 2010, and 2011 was $5.59, $5.27, and $5.04 per share, respectively. The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the aggregate difference between the closing stock price of the Company's common stock on December 31, 2011 and the exercise...

  • Page 101
    ... vested restricted stock awards and restricted stock units were net share settled. The Company withheld 2.8 million shares based upon the Company's closing stock price on the vesting date to settle the employees' minimum statutory obligation for the applicable income and other employment taxes. The...

  • Page 102
    ... of awards, the number of shares which ultimately vest will range from 0 percent to 200 percent of the target amount stated in each executive's award agreement based on the performance of the Company relative to the applicable performance targets. The first type of award consists of restricted stock...

  • Page 103
    ... with original lease periods up to 13 years which expire between 2011 and 2022. In 2008, the Company entered into an 11-year lease agreement for a data center in the western U.S. Of the total expected minimum lease commitment of $105 million, $21 million was classified as an operating lease for real...

  • Page 104
    ... the Company's Search and Advertising Services and Sales Agreement (the "Search Agreement") and License Agreement with Microsoft Corporation ("Microsoft"). Contingencies. From time to time, third parties assert patent infringement claims against Yahoo!. Currently, the Company is engaged in lawsuits...

  • Page 105
    ... In re Yahoo! Inc. Securities Litigation and appointed the Pension Trust Fund for Operating Engineers as lead plaintiff. In a consolidated amended complaint filed December 15, 2011, the lead plaintiff purports to represent a class of investors who purchased the Company's common stock between April...

  • Page 106
    ... Company manages its business geographically. The primary areas of measurement and decision making are the Americas, EMEA (Europe, Middle East and Africa) and Asia Pacific. Management relies on an internal reporting process that provides revenue ex-TAC, which is defined as revenue less TAC, direct...

  • Page 107
    ... segment such as employee compensation expense (excluding stock-based compensation expense), local sales and marketing expenses, and facilities expenses. Beginning in the fourth quarter of 2010, the Company no longer includes TAC in segment direct costs. For comparison purposes, prior period amounts...

  • Page 108
    ... entire investment. Pursuant to the Partnership Agreement of Softbank Capital Partners LP, the Company invested on the same terms and on the same basis as all other limited partners. Revenue from related parties, excluding Yahoo Japan and Alibaba Group, represented approximately 1 percent of total...

  • Page 109
    ... Yahoo Japan and Alibaba Group. Note 15 RESTRUCTURING CHARGES, NET Restructuring charges, net consists of costs associated with the six restructuring activities initiated in 2009, 2010, and 2011. It includes employee severance pay and related costs, accelerations and reversals of stock-based...

  • Page 110
    ... the Company's acquired businesses departed. The Company incurred $19 million of non-cash stock-based compensation expense for the acceleration of certain of the executive's stock-based awards pursuant to the acquisition agreements. During the year ended December 31, 2010, the Company incurred total...

  • Page 111
    ... of 2010. The pre-tax cash charges were offset by a $4 million credit related to non-cash stock-based compensation expense reversals for unvested stock awards that were forfeited. During the year ended December 31, 2011, the Company recorded a net reversal of $3 million for adjustments to original...

  • Page 112
    ...Balance as of January 1, 2010 ...Employee severance pay and related costs ...Reversals of stock-based compensation expense . . Non-cancelable... accruals were included in the Company's consolidated balance sheets as follows (in thousands): 2010 2011 Accrued expenses and other current liabilities...

  • Page 113
    ... of 2010. In 2011, the Company completed the transition of algorithmic search in all other markets and the transition of paid search in India. The market-by-market transition of the Company's paid search platform to Microsoft's platform and the migration of paid search advertisers and publishers to...

  • Page 114
    ...RPS Guarantee") on Yahoo! Properties only for 18 months after the transition of paid search services to Microsoft's platform in that market. In the fourth quarter of 2011, Microsoft agreed to extend the RPS Guarantee in the U.S. and Canada through March 2013. The RPS Guarantee is calculated based on...

  • Page 115
    ... of $11 million. Half of the value was awarded in the form of stock options and half in the form of restricted stock units, with the award values converted into options or units, respectively, based on customary Company equity award conversion policies. Each of these equity awards is scheduled to...

  • Page 116
    ...at End of Year Accounts receivable Allowance for doubtful accounts 2009 ...2010 ...2011 ... 51,600 41,003 22,975 Balance at Beginning of Year 4,607 4,944 18,147 (15,204) (22,972) (10,980) 41,003 22,975 30,142 Balance at End of Year Charged (Credited) Charged to to Other Expenses Accounts(*) (In...

  • Page 117
    ... with the transition pursuant to the Search Agreement. For transitioned markets, Yahoo! now reports an 88 percent revenue share for search advertising services provided by Microsoft. Yahoo!'s income tax provision was also reduced by the effect of certain tax benefits as discussed in Note 9-"Income...

  • Page 118
    ... the Exchange Act) during the quarter ended December 31, 2011 that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting. Item 9B. Other Information Executive Incentive Plan On February 27, 2012, the Compensation and Leadership Development...

  • Page 119
    ...may range from 50 percent to 200 percent based on Yahoo!'s revenue ex-TAC growth rate and ex-TAC operating margin (each as defined in the ...2011 and who are currently employed as executive officers of the Company and will participate in the EIP: Name and Principal Position 2012 Target Bonus (% of Base...

  • Page 120
    ... 120 days after the end of the fiscal year ended December 31, 2011. Item 14. Principal Accounting Fees and Services The information required by this item is incorporated by reference to Yahoo!'s Proxy Statement for its 2012 Annual Meeting of Shareholders to be filed with the SEC within 120 days...

  • Page 121
    ... 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 29th day of February 2012. YAHOO! INC. By: /S/ TIMOTHY R. MORSE Timothy R. Morse Chief Financial Officer Power of Attorney KNOW...

  • Page 122
    ...KENNY David W. Kenny Director February 29, 2012 /S/ ARTHUR H. KERN Arthur H. Kern Director February 29, 2012 /S/ BRAD D. SMITH Brad D. Smith Director February 29, 2012 /S/ MAYNARD G. WEBB, JR. Maynard G. Webb, Jr. Director February 29, 2012 /S/ GARY L. WILSON Gary L. Wilson Director...

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

  • Page 124
    ... Report on Form 10-K filed February 28, 2011 and incorporated herein by reference). Form of Second Letter Amendment (2012) to Performance Restricted Stock Unit Award Agreement (2010 AFP version) under the Yahoo! Inc. 1995 Stock Plan. Form of Performance Restricted Stock Unit Award Agreement under...

  • Page 125
    Exhibit Number Description 10.3(B)+ Form of Enrollment Agreement under the Yahoo! Inc. Amended and Restated 1996 Employee Stock Purchase Plan (previously filed as Exhibit 10.3(B) to the Registrant's Quarterly Report on Form 10-Q filed May 10, 2011 and incorporated herein by reference). Yahoo! Inc...

  • Page 126
    ...14(J) to the Registrant's Annual Report on Form 10-K filed February 26, 2010 and incorporated herein by reference). 10.14(H)+ Form of Performance Restricted Stock Unit Award Agreement (AFP version)-2010 between the Registrant and Carol Bartz under the Yahoo! Inc. 1995 Stock Plan (previously filed as...

  • Page 127
    ... Number Description 10.16(D)†First Amendment to Search and Advertising Services and Sales Agreement, dated as of July 14, 2010, by and between the Registrant and Microsoft Corporation (previously filed as Exhibit 10.18(D) to the Registrant's Quarterly Report on Form 10-Q filed May 10, 2011...

  • Page 128
    Exhibit Number Description 10.20(C)+* 10.20(D)+* 21.1* 23.1* 24.1 31.1* Form of Restricted Stock Unit Award Agreement (CEO Inducement Grant) between the Registrant and Scott Thompson. Form of Restricted Stock Unit Award Agreement (CEO Annual Grant) between the Registrant and Scott Thompson. List ...

  • Page 129
    ..., not misleading with respect to the period covered by this report; Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of...

  • Page 130
    ..., not misleading with respect to the period covered by this report; Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of...

  • Page 131
    ... 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: SCOTT THOMPSON Scott Thompson Chief Executive Officer February 29, 2012 /S/ Name...

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  • Page 135
    ... limited to, Yahoo!, Y!, IntoNow, interclick, Livestand, Flickr, Right Media, omg!, Shine, Sportacular, Prime Time in No Time, Behind Enemy Lines, Ready Set Dance, Yahoo! Search BOSS, Wretch, Meme from Yahoo!, Citizen Sports, Associated Content and their respective logos. Other names are trademarks...

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