Yahoo 2013 Annual Report Download - page 20

Fluctuations in foreign currency exchange rates may adversely affect our operating results and financial
condition.
Revenue generated and expenses incurred by our international subsidiaries and equity method investees are often
denominated in the currencies of the local countries. As a result, our consolidated U.S. dollar financial statements
are subject to fluctuations due to changes in exchange rates as the financial results of our international
subsidiaries and equity method investees are translated from local currencies into U.S. dollars. Our financial
results are also subject to changes in exchange rates that impact the settlement of transactions in non-local
currencies. The carrying values of our equity investments in our equity investees are also subject to fluctuations
in the exchange rates of foreign currencies.
We use derivative instruments, such as foreign currency forward contracts, to partially offset certain exposures to
fluctuations in foreign currency exchange rates. The use of such instruments may not offset any, or more than a
portion, of the adverse financial effects of unfavorable movements in foreign currency exchange rates. Any
losses on these instruments that we experience may adversely impact our financial results, cash flows and
financial condition. Further, we hedge a portion of our net investment in Yahoo Japan with currency forward
contracts. If the Japanese yen appreciated at maturity beyond the forward contract execution rates, we would be
required to settle the contract by making a cash payment which could be material and could adversely impact our
cash flows and financial condition. See Part II, Item 7A—“Quantitative and Qualitative Disclosures About
Market Risk” of this Annual Report.
Our business depends on a strong brand, and failing to maintain or enhance the Yahoo brands in a cost-
effective manner could harm our operating results.
Maintaining and enhancing our brands is an important aspect of our efforts to attract and expand our user,
advertiser, and Affiliate base. We believe that the importance of brand recognition will increase due to the
relatively low barriers to entry in certain portions of the Internet market. Maintaining and enhancing our brands
will depend largely on our ability to provide high-quality, innovative products and services, which we might not
do successfully. We have spent and expect to spend considerable money and resources on the establishment and
maintenance of our brands, as well as 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 such
as service outages, product malfunctions, data protection and security issues, exploitation of our trademarks by
others without permission, and poor presentation or integration of our search marketing offerings by Affiliates on
their sites or in their software and services.
Further, while we attempt to ensure that the quality of our brands is maintained by our licensees, our licensees
might take actions that could impair the value of our brands, our proprietary rights, or the reputation of our
products and media properties. If we are unable to maintain or enhance our brands in a cost-effective manner, or
if we incur excessive expenses in these efforts, our business, operating results and financial condition could be
harmed.
We are regularly involved in claims, suits, government investigations, and other proceedings that may result in
adverse outcomes.
We are regularly involved in claims, suits, government investigations, and proceedings arising from the ordinary
course of our business, including actions with respect to intellectual property claims, privacy, consumer
protection, information security, data protection or law enforcement matters, tax matters, labor and employment
claims, commercial claims, as well as actions involving content generated by our users, stockholder derivative
actions, purported class action lawsuits, and other matters. Such claims, suits, government investigations, and
proceedings are inherently uncertain and their results cannot be predicted with certainty. Regardless of the
outcome, such legal proceedings can have an adverse impact on us because of legal costs, diversion of
management and other personnel, and other factors. In addition, it is possible that a resolution of one or more
such proceedings could result in reputational harm, liability, penalties, or sanctions, as well as judgments,
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