Yahoo 1998 Annual Report Download - page 27

position and the results of operations as if Yoyodyne was a wholly-owned
subsidiary of the Company since inception. During October 1998, the Company
recorded a one-time charge of $2.1 million for acquisition-related costs. These
costs consisted of broker fees, legal and accounting fees, and certain other
expenses directly related to the acquisition.
On December 17, 1998, the Company completed the acquisition of all outstanding
shares of HyperParallel, Inc. (“HyperParallel”), a direct marketing company special-
izing in data analysis, through the issuance of 74,856 shares of Yahoo! Common
Stock and cash, totaling $8.1 million. The acquisition was accounted for as a pur-
chase in accordance with APB 16. Under the purchase method of accounting, the
purchase price is allocated to the assets acquired and liabilities assumed based on
their estimated fair values at the date of the acquisition. The excess purchase price
over the estimated fair value of the assets acquired and liabilities assumed has
been allocated to goodwill. Results of operations for HyperParallel have been
included with those of the Company for periods subsequent to the date of acquisi-
tion. The Company estimated that the economic useful lives of current technology
and goodwill were three and seven years, respectively. The Company recorded a
charge to earnings of $2.3 million for in-process research and development that
had not yet reached technological feasibility and had no alternative future use.
Factors considered in estimating the allocation of purchase price to in-process
research and development were estimating cash flows resulting from the expected
revenues to be generated from the project, and discounting the net cash flows, in
addition to other assumptions. If this project is not successfully developed, the
Company’s sales and profitability may be adversely affected in future periods.
On January 28, 1999, the Company announced the signing of a definitive agreement
to acquire GeoCities, a publicly traded Internet company. Under the terms of the
acquisition, which will be accounted for as a pooling of interests, the Company
will exchange approximately 21,254,000 shares of Yahoo! Common Stock for
approximately 31,403,000 shares of GeoCities common stock. Additionally, the
Company will convert approximately 8,894,000 GeoCities stock options into
approximately 6,019,000 Yahoo! stock options. The acquisition is expected to be
completed in the second quarter of 1999 and is subject to certain conditions,
regulatory approval, and approval by GeoCities stockholders. The Company
expects to record a one-time charge in the second quarter of 1999 relating to
expenses incurred with this transaction. GeoCities’ operating results for the years
ended December 31, 1998, 1997, and 1996 included revenues of approximately
$18.4 million, $4.6 million, and $0.3 million, respectively, and net losses of
approximately $19.8 million, $8.9 million, and $3.0 million, respectively.
The Company’s revenues are derived principally from the sale of banner and
sponsorship advertisements. The Company’s standard rates for banner advertising
currently range from approximately $6.00 per thousand impressions for run of
network to approximately $90.00 per thousand impressions for highly targeted
audiences and properties. To date, the duration of the Company’s banner advertis-
ing commitments has ranged from one week to two years. Sponsorship advertising
contracts have longer terms (ranging from three months to two years) than
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