Yahoo 2014 Annual Report Download - page 21

Implementation of our Search Agreement with Microsoft commenced on February 23, 2010. We have
completed the transition of our algorithmic search platform to Microsoft’s platform and have
substantially completed transition of paid search. Pursuant to the Search Agreement with Microsoft,
to maintain and grow search revenue, we are dependent on Microsoft continuing to invest and
innovate to maintain and improve its algorithmic and paid search services and to be competitive with
other search providers. If Microsoft fails to do this, our revenue and profitability could decline and our
ability to maintain and expand our relationships with Affiliates for search and paid search advertising
could be negatively impacted. Further, our competitors may continue to increase revenue,
profitability, and market share at a higher rate than we do.
In addition to other termination rights, as of February 23, 2015 (the fifth anniversary of the
commencement date of the Search Agreement), for a period of 30 days following such date, the
Company has the right to terminate the Search Agreement if the trailing 12-month average of the
Company’s revenue per search in the United States (the “U.S. RPS”) on Yahoo Properties is less than
a specified percentage of Google’s trailing 12-month estimated average U.S. RPS, excluding, in each
case, mobile devices. Termination of the Search Agreement, or disputes with Microsoft related to a
termination of the Search Agreement, could have an adverse impact on our business, revenue and
operating results.
Our proposed plan to spin off all of our remaining holdings in Alibaba Group is subject to certain
conditions and there can be no assurance that the spin-off will be completed or that the expected
benefits from the proposed spin-off to Yahoo and its stockholders will be realized.
We have announced a plan for a spin-off of all of our remaining holdings in Alibaba Group and a
current operating business of Yahoo, Yahoo Small Business, into a newly formed independent
registered investment company (referred to as “SpinCo”). The stock of SpinCo will be distributed pro
rata to our stockholders, resulting in SpinCo becoming a separate publicly traded registered
investment company.
The completion of the spin-off is subject to certain conditions, including final approval by our Board,
receipt of a favorable ruling from the Internal Revenue Service with respect to certain aspects of the
transaction and a legal opinion with respect to the tax-free treatment of the transaction under U.S.
federal tax laws and regulations, the effectiveness of an applicable registration statement with the
Securities and Exchange Commission, and compliance with the requirements under the Investment
Company Act of 1940. Possible delays or the failure in satisfying the above-described conditions or
other factors, including adverse regulatory developments or determinations or adverse changes in, or
interpretations of, U.S. or foreign tax laws, rules or regulations, or required third party consents, could
delay or prevent completion of the proposed spin-off or cause the terms of the proposed spin-off to
be materially modified. In addition, we expect that the process of completing the proposed spin-off
will involve dedication of significant resources and the incurrence of significant costs and expenses.
Further, there can be no assurance that the expected benefits from the proposed spin-off to Yahoo
and its stockholders will be realized.
If we are unable to license or acquire compelling content and services at reasonable cost, develop or
commission compelling content of our own or receive compelling content from our users, the
number of users of our services may not grow as anticipated, or may decline, or users’ level of
engagement with our services may decline, all of which could harm our operating results.
Our future success depends in part on our ability to aggregate compelling content and deliver that
content through our online properties. We license from third parties much of the content and
services on our online properties, such as news, stock quotes, weather, video, and maps. In addition,
our users also contribute content to us. We believe that users will increasingly demand high-quality
content and services. We may need to make substantial payments to third parties from whom we
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