Statement Of Income (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2009	Jun. 30, 2008	Jun. 30, 2009	Jun. 30, 2008
Revenues	$ 1,572,897	$ 1,798,085	$ 3,152,939	$ 3,615,687
Cost of revenues	712,453	765,911	1,413,190	1,520,994
Gross profit	860,444	1,032,174	1,739,749	2,094,693
Operating expenses:
Sales and marketing	280,386	404,899	601,498	829,490
Product development	291,398	314,719	597,441	620,325
General and administrative	138,652	188,811	275,649	359,891
Amortization of intangibles	9,253	23,224	18,920	46,964
Restructuring charges, net	65,002	0	69,803	16,885
Total operating expenses	784,691	931,653	1,563,311	1,873,555
Income from operations	75,753	100,521	176,438	221,138
Other income, net	72,010	24,583	76,970	39,248
Income before income taxes and earnings in equity interests	147,763	125,104	253,408	260,386
Provision for income taxes	(68,879)	(47,656)	(104,763)	(100,955)
Earnings in equity interests	64,156	54,927	113,090	509,709
Net income	143,040	132,375	261,735	669,140
Less: Net income attributable to noncontrolling interests	(1,653)	(1,214)	(2,790)	(1,139)
Net income attributable to Yahoo! Inc.	141,387	131,161	258,945	668,001
Net income attributable to Yahoo! Inc. common stockholders per share - basic	$ 0.10	$ 0.10	$ 0.19	$ 0.49
Net income attributable to Yahoo! Inc. common stockholders per share - diluted	$ 0.10	$ 0.09	$ 0.18	$ 0.46
Shares used in per share calculation - basic	1,394,783	1,372,629	1,393,155	1,353,180
Shares used in per share calculation - diluted	1,414,295	1,397,839	1,410,348	1,391,930
Stock-based compensation expense by function:
Cost of revenues	2,663	3,549	6,242	6,829
Sales and marketing	35,651	56,306	85,548	121,844
Product development	51,647	46,442	105,925	94,524
General and administrative	22,565	16,871	41,531	37,260
Restructuring expense reversals	$ (7,600)	$ 0	$ (7,600)	$ (12,284)

Statement Of Financial Position Classified (USD $) In Thousands, unless otherwise specified	Jun. 30, 2009	Dec. 31, 2008
Current assets:
Cash and cash equivalents	$ 2,284,086	$ 2,292,296
Short-term marketable debt securities	1,594,226	1,159,691
Accounts receivable, net	907,276	1,060,450
Prepaid expenses and other current assets	243,263	233,061
Total current assets	5,028,851	4,745,498
Long-term marketable debt securities	319,137	69,986
Property and equipment, net	1,430,377	1,536,181
Goodwill	3,461,604	3,440,889
Intangible assets, net	396,128	485,860
Other long-term assets	131,730	233,989
Investments in equity interests	3,308,402	3,177,445
Total assets	14,076,229	13,689,848
Current liabilities:
Accounts payable	81,803	151,897
Accrued expenses and other current liabilities	964,422	1,139,894
Deferred revenue	416,659	413,224
Total current liabilities	1,462,884	1,705,015
Long-term deferred revenue	167,685	218,438
Capital lease and other long-term liabilities	87,197	77,062
Deferred and other long-term tax liabilities, net	438,014	420,372
Total liabilities	2,155,780	2,420,887
Commitments and contingencies (Note 11)	0	0
Yahoo! Inc. stockholders' equity:
Common stock, $0.001 par value; 5,000,000 shares authorized; 1,600,220 shares issued and 1,391,560 shares outstanding as of December 31, 2008 and 1,403,074 shares issued and 1,402,992 shares outstanding as of June 30, 2009	1,397	1,595
Additional paid-in capital	10,428,298	11,643,635
Treasury stock at cost, 208,660 shares as of December 31, 2008 and 82 shares as of June 30, 2009	(1,290)	(5,267,484)
Retained earnings	1,260,592	4,752,920
Accumulated other comprehensive income	210,644	120,276
Total Yahoo! Inc. stockholders' equity	11,899,641	11,250,942
Noncontrolling interests	20,808	18,019
Total equity	11,920,449	11,268,961
Total liabilities and equity	$ 14,076,229	$ 13,689,848

Statement Of Financial Position Classified (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	Jun. 30, 2009	Dec. 31, 2008
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	5,000,000	5,000,000
Common stock, shares issued	1,403,074	1,600,220
Common stock, shares outstanding	1,402,992	1,391,560
Treasury stock, shares	82	208,660

Statement Of Cash Flows Indirect (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2009	Jun. 30, 2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 261,735	$ 669,140
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	273,502	243,470
Amortization of intangible assets	105,811	147,398
Stock-based compensation expense	231,646	248,173
Non-cash restructuring charges	6,467	0
Tax benefits from stock-based awards	16,536	31,133
Excess tax benefits from stock-based awards	(67,186)	0
Deferred income taxes	24,741	37,527
Earnings in equity interests	(113,090)	(509,709)
Dividends received from equity investee	26,145	18,942
(Gain)/loss from sale of investments, assets, and other, net	(72,243)	5,365
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable, net	163,262	23,636
Prepaid expenses and other	4,618	(5,647)
Accounts payable	(69,621)	(39,452)
Accrued expenses and other liabilities	(139,378)	54,616
Deferred revenue	(48,802)	287,551
Net cash provided by operating activities	604,143	1,212,143
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment, net	(165,155)	(315,690)
Purchases of marketable debt securities	(2,173,606)	(889,467)
Proceeds from sales of marketable debt securities	56,159	199,301
Proceeds from maturities of marketable debt securities	1,439,837	370,977
Proceeds from sales of marketable equity securities	119,987	0
Acquisitions, net of cash acquired	0	(179,609)
Purchases of intangible assets	(21,751)	(51,160)
Other investing activities, net	(86)	(7,877)
Net cash used in investing activities	(744,615)	(873,525)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock	71,052	317,445
Repurchases of common stock	0	(79,236)
Excess tax benefits from stock-based awards	67,186	0
Tax withholdings related to net share settlements of restricted stock awards and restricted stock units	(26,618)	(56,612)
Other financing activities, net	0	(74)
Net cash provided by financing activities	111,620	181,523
Effect of exchange rate changes on cash and cash equivalents	20,642	17,299
Net change in cash and cash equivalents	(8,210)	537,440
Cash and cash equivalents at beginning of period	2,292,296	1,513,930
Cash and cash equivalents at end of period	$ 2,284,086	$ 2,051,370

Notes to Financial Statements

6 Months Ended

Jun. 30, 2009

Notes to Financial Statements [Abstract]

Supplemental cash flow disclosures:

Supplemental cash flow disclosures:

During the six months ended June 30, 2008, the holders of the Company’s zero coupon senior convertible notes (the “Notes”) converted $750 million of the Notes into 36.6 million shares of Yahoo! common stock. See Note 9 — “Debt” for additional information.


	June 30, 2008			June 30, 2009
	(Unaudited, in thousands)
Acquisition-related activities:
Cash paid for acquisitions	$	180,104		$	—
Cash acquired in acquisitions		(495	)		—

	$	179,609		$	—

Note 1 THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Note 1 THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company. Yahoo! Inc., together with its consolidated subsidiaries (“Yahoo!” or the “Company”) is a leading global consumer brand and one of the most trafficked Internet destinations worldwide. Yahoo! is where millions of people go every day to see what is happening with the people and things that matter to them most. Yahoo! helps marketers reach that audience with its unique and compelling advertiser proposition. Together with the Company’s owned and operated online properties and services (“Yahoo! Properties” or “Owned and Operated sites”), Yahoo! also provides its advertising offerings and access to Internet users beyond Yahoo! through its distribution network of third-party entities (“Affiliates”), who have integrated the Company’s advertising offerings into their Websites, referred to as Affiliate sites, or their other offerings. The Company generates revenues by providing marketing services to advertisers across a majority of Yahoo! Properties and Affiliate sites. Additionally, although many of the services the Company provides to users are free, Yahoo! does charge fees for a range of premium services.

Basis of Presentation. The condensed consolidated financial statements include the accounts of Yahoo! Inc. and its majority-owned or otherwise controlled subsidiaries. Minority interests have been re-captioned to noncontrolling interests and have been presented in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51.” All significant intercompany accounts and transactions have been eliminated. Investments in entities in which the Company can exercise significant influence, but does not own a majority equity interest or otherwise control, are accounted for using the equity method and are included as investments in equity interests on the condensed consolidated balance sheets. The Company has included the results of operations of acquired companies from the closing date of the acquisition. Certain prior period amounts have been reclassified to conform to the current period presentation.

The accompanying unaudited condensed consolidated interim financial statements reflect all adjustments, consisting of only normal recurring items, which, in the opinion of management, are necessary for a fair statement of the results of operations for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for the full year or for any future periods.

The preparation of consolidated financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States (“U.S.”) requires management to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and the related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to uncollectible receivables, the useful lives of long-lived assets including property and equipment, investment fair values, stock-based compensation, goodwill and other intangible assets, income taxes, contingencies, and restructuring charges. The Company bases its estimates of the carrying value of certain assets and liabilities on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, when these carrying values are not readily available from other sources. Actual results may differ from these estimates.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. The condensed consolidated balance sheet as of December 31, 2008 was derived from the Company’s audited financial statements for the year ended December 31, 2008, but does not include all disclosures required by U.S. GAAP. However, the Company believes the disclosures are adequate to make the information presented not misleading.

Recent Accounting Pronouncements

In May 2009, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 165, “Subsequent Events” (“SFAS 165”), which is effective for interim and annual periods ending after June 15, 2009. SFAS 165 provides guidance on management’s assessment of subsequent events, clarifying that management must evaluate, as of each reporting period, events or transactions that occur after the balance sheet date through the date that the financial statements are issued or available to be issued. The Company has evaluated subsequent events through August 7, 2009, the date that these financial statements were issued.

In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification^™ and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162” (“SFAS 168”), which is effective for interim and annual periods ending after September 15, 2009. SFAS 168 makes the FASB Accounting Standards Codification (“Codification”) the single authoritative source for U.S. GAAP. The Codification replaces all previous U.S. GAAP accounting standards. The adoption of SFAS 168 will only impact references for accounting guidance.

Note 2 BASIC AND DILUTED NET INCOME ATTRIBUTABLE TO YAHOO! INC. COMMON STOCKHOLDERS PER SHARE

Note 2 BASIC AND DILUTED NET INCOME ATTRIBUTABLE TO YAHOO! INC. COMMON STOCKHOLDERS PER SHARE

Basic net income per share attributable to Yahoo! common stockholders is computed using the weighted average number of common shares outstanding during the period, excluding net income attributable 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”)) in accordance with FASB Staff Position (“FSP”) EITF 03-6-1 “Determining Whether Instruments Granted In Share-Based Payment Transactions Are Participating Securities.” Diluted net income per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of unvested restricted stock and shares underlying unvested restricted stock units (using the treasury stock method), the incremental common shares issuable upon the exercise of stock options (using the treasury stock method), shares to be purchased under the employee stock purchase plan, and shares issuable upon an assumed conversion of the Company’s Notes prior to their maturity and conversion on April 1, 2008. In applying the treasury stock method, the Company calculates potential tax windfalls and shortfalls by including the impact of pro forma deferred tax assets.

The Company takes into account the effect on consolidated net income per share of dilutive securities of entities in which the Company holds equity interests that are accounted for using the equity method.

Potentially dilutive securities representing approximately 133 million and 138 million shares of common stock for the three and six months ended June 30, 2009, respectively, and 129 million and 133 million for the three and six months ended June 30, 2008, were excluded from the computation of diluted earnings per share for these periods because their effect would have been anti-dilutive.

The following table sets forth the computation of basic and diluted net income per share (in thousands, except per share amounts):


	Three Months Ended						Six Months Ended
	June 30, 2008			June 30, 2009			June 30, 2008			June 30, 2009
*Basic:*
Numerator:
Net income attributable to Yahoo!	$	131,161		$	141,387		$	668,001		$	258,945
Less: Net income allocated to participating securities		(273	)		(171	)		(1,675	)		(324	)

Net income attributable to Yahoo! common stockholders — basic	$	130,888		$	141,216		$	666,326		$	258,621


Denominator:
Weighted average common shares		1,372,629			1,394,783			1,353,180			1,393,155

Net income attributable to Yahoo! common stockholders per share — basic	$	0.10		$	0.10		$	0.49		$	0.19


*Diluted:*
Numerator:
Net income attributable to Yahoo!	$	131,161		$	141,387		$	668,001		$	258,945
Less: Net income allocated to participating securities		(135	)		(24	)		(860	)		(55	)
Less: Effect of dilutive securities issued by equity investees		—			(219	)		(26,860	)		(445	)
Add: Interest expense, net of tax, related to the Notes		54			—			5,370			—

Net income attributable to Yahoo! common stockholders — diluted	$	131,080		$	141,144		$	645,651		$	258,445


Denominator:
Denominator for basic calculation		1,372,629			1,394,783			1,353,180			1,393,155
Weighted average effect of Yahoo! dilutive securities:
Restricted stock and restricted stock units		8,666			11,741			8,542			11,255
Stock options		12,349			6,095			13,359			5,938
ESPP		1,691			1,676			1,401			—
Assumed conversion of the Notes		2,504			—			15,448			—

Denominator for diluted calculation		1,397,839			1,414,295			1,391,930			1,410,348

Net income attributable to Yahoo! common stockholders per share — diluted	$	0.09		$	0.10		$	0.46		$	0.18

See Note 9 — “Debt” for additional information related to the Company’s Notes.

Note 3 INVESTMENTS IN EQUITY INTERESTS

Note 3 INVESTMENTS IN EQUITY INTERESTS

The following table summarizes the Company’s investments in equity interests (dollars in thousands):


	December 31, 2008		June 30, 2009		Percent Ownership of Common Stock
Alibaba Group	$	2,216,659	$	2,161,912	44	%
Alibaba.com		51,999		52,440	1	%
Yahoo! Japan		905,672		1,090,371	35	%
Other		3,115		3,679

Total	$	3,177,445	$	3,308,402

Equity Investment in Alibaba Group. The investment in Alibaba Group Holding Limited (“Alibaba Group”) is accounted for using the equity method, and the total investment, including net tangible assets, identifiable intangible assets and goodwill, is classified as part of investments in equity interests on the Company’s condensed consolidated balance sheets. The Company records its share of the results of Alibaba Group and any related amortization expense, one quarter in arrears, within earnings in equity interests in the condensed consolidated statements of income.

The following table presents Alibaba Group’s U.S. GAAP condensed financial information, as derived from the Alibaba Group consolidated financial statements (in thousands):


	Three Months Ended						Six Months Ended
	March 31, 2008			March 31, 2009			March 31, 2008			March 31, 2009
Operating data⁽¹⁾:
Revenues	$	106,336		$	156,628		$	203,984		$	309,276
Gross profit	$	76,152		$	115,122		$	138,573		$	218,615
(Loss)/income from operations⁽²⁾	$	(7,663	)	$	1,934		$	(213,073	)	$	(43,676	)
Net income/(loss)⁽³⁾	$	9,000		$	(5,423	)	$	1,892,257		$	(64,511	)


	September 30, 2008		March 31, 2009
Balance sheet data:
Current assets	$	2,585,369	$	2,800,745
Long-term assets	$	2,193,374	$	2,254,182
Current liabilities	$	821,174	$	1,133,499
Long-term liabilities	$	20,131	$	20,345
Noncontrolling interests	$	187,570	$	203,304

⁽¹⁾	The Company records its share of the results of Alibaba Group one quarter in arrears within earnings in equity interests in its condensed consolidated statements of income.

⁽²⁾	The loss from operations of $213 million for the six months ended March 31, 2008 is primarily due to Alibaba Group’s impairment loss on goodwill and intangible assets of $178 million for which Yahoo! Inc. has no basis in its investment balance.

⁽³⁾	The net income of $1.9 billion for the six months ended March 31, 2008 includes the gain from Alibaba Group’s sale of an approximate 27 percent ownership interest in Alibaba.com in Alibaba.com’s initial public offering (“IPO”).

The Company also has commercial arrangements with Alibaba Group to provide technical, development, and advertising services. For the three and six months ended June 30, 2008 and 2009, these transactions were not material.

Equity Investment in Alibaba.com Limited. As part of the IPO of Alibaba.com, the Company purchased an approximate 1 percent interest in the common stock of Alibaba.com. This investment is accounted for using the equity method, consistent with the Company’s investment in Alibaba Group, which holds the controlling interest in Alibaba.com. The fair value of the Company’s ownership interest in the common stock of Alibaba.com, based on the quoted stock price, was approximately $102 million as of June 30, 2009.

Equity Investment in Yahoo! Japan. The investment in Yahoo! Japan Corporation (“Yahoo! Japan”) is accounted for using the equity method, and the total investment, including net tangible assets, identifiable intangible assets and goodwill, is classified as part of investments in equity interests on the Company’s condensed consolidated balance sheets. The Company records its share of the results of Yahoo! Japan and any related amortization expense, one quarter in arrears, within earnings in equity interests in the condensed consolidated statements of income. The fair value of the Company’s ownership interest in the common stock of Yahoo! Japan, based on the quoted stock price, was approximately $6 billion as of June 30, 2009.

As of June 30, 2009, the Company’s ownership interest in Yahoo! Japan was approximately 35 percent compared to 34 percent as of March 31, 2009. The 1 percent increase is due to share repurchases that were undertaken by Yahoo! Japan on the open market. The Company’s proportionate share of Yahoo! Japan’s share repurchase amount in excess of its book value was approximately $87 million and has been primarily allocated to goodwill. Goodwill is not deductible for tax purposes.

During the three months ended June 30, 2008 and 2009, the Company received cash dividends from Yahoo! Japan in the amounts of $19 million and $26 million, net of taxes, respectively, which were recorded as reductions in the Company’s investment in Yahoo! Japan.

The following table presents Yahoo! Japan’s condensed financial information, as derived from the Yahoo! Japan consolidated financial statements (in thousands):


	Three Months Ended				Six Months Ended
	March 31, 2008		March 31, 2009		March 31, 2008		March 31, 2009
Operating data^(*):
Revenues	$	704,071	$	803,611	$	1,322,819	$	1,582,258
Gross profit	$	598,903	$	681,792	$	1,129,590	$	1,339,770
Income from operations	$	320,249	$	380,281	$	596,565	$	724,586
Net income	$	153,423	$	199,840	$	305,110	$	398,549


	September 30, 2008		March 31, 2009
Balance sheet data:
Current assets	$	1,202,164	$	939,357
Long-term assets	$	1,923,195	$	2,262,925
Current liabilities	$	778,110	$	665,156
Long-term liabilities	$	189,719	$	106,558
Noncontrolling interests	$	25,665	$	21,235

^(*)	The Company records its share of the results of Yahoo! Japan one quarter in arrears in earnings in equity interests in the condensed consolidated statements of income.

The differences between U.S. GAAP and accounting principles generally accepted in Japan, the standards by which Yahoo! Japan’s financial statements are prepared, did not materially impact the amounts reflected in the Company’s condensed consolidated financial statements.

Through its commercial arrangement with Yahoo! Japan, the Company provides advertising and search marketing services to Yahoo! Japan for a service fee. Under this arrangement, the Company records marketing services revenue from Yahoo! Japan for the provision of search marketing services based on a percentage of advertising revenues earned by Yahoo! Japan for the delivery of sponsored search results. In addition, the Company recognizes revenues from license fees received from Yahoo! Japan. These arrangements resulted in revenues of approximately $81 million and $73 million, respectively, for the three months ended June 30, 2008 and 2009 and revenues of approximately $154 million and $148 million, respectively, for the six months ended June 30, 2008 and 2009. As of both December 31, 2008 and June 30, 2009, the Company had a net receivable balance from Yahoo! Japan of approximately $39 million.

Note 4 GOODWILL

Note 4 GOODWILL

The change in the carrying amount of goodwill for the six months ended June 30, 2009 was primarily due to foreign currency translation gains of $21 million.

Note 5 INTANGIBLE ASSETS, NET

Note 5 INTANGIBLE ASSETS, NET

The following table summarizes the Company’s intangible assets, net (in thousands):


	December 31, 2008		June 30, 2009
	Net		Gross Carrying Amount		Accumulated Amortization⁽¹⁾			Net⁽²⁾
Customer, affiliate, and advertiser related relationships	$	99,828	$	137,777	$	(50,179	)	$	87,598
Developed technology and patents		350,168		511,363		(235,650	)		275,713
Trade name, trademark, and domain name		35,864		74,828		(42,011	)		32,817

Total intangible assets, net	$	485,860	$	723,968	$	(327,840	)	$	396,128

₍₁₎	Foreign currency translation adjustments, reflecting movement in the currencies of the underlying entities, totaled approximately $13 million as of June 30, 2009.

₍₂₎

As of December 31, 2008 and June 30, 2009, $441 million and $353 million, respectively, of the net intangibles balance were related to the U.S. segment. As of December 31, 2008 and June 30, 2009, $45 million and $43 million, respectively, of the net intangibles balance were related to the International segment.

For the three months ended June 30, 2008 and 2009, the Company recognized amortization expense for intangible assets of $77 million and $59 million, respectively, including $54 million in cost of revenues for the three months ended June 30, 2008 and $50 million in cost of revenues for the three months ended June 30, 2009. For the six months ended June 30, 2008 and 2009, the Company recognized amortization expense for intangible assets of $147 million and $106 million, respectively, including $100 million in cost of revenues for the six months ended June 30, 2008 and $87 million for the six months ended June 30, 2009. Based on the current amount of intangibles subject to amortization, the estimated amortization expense for the remainder of 2009 and each of the succeeding years is as follows: six months ending December 31, 2009: $77 million; 2010: $119 million; 2011: $88 million; 2012: $56 million; 2013: $24 million; 2014: $11 million; and cumulatively thereafter: $4 million.

Note 6 OTHER INCOME, NET

Note 6 OTHER INCOME, NET

Other income, net is comprised of (in thousands):


	Three Months Ended				Six Months Ended
	June 30, 2008		June 30, 2009		June 30, 2008			June 30, 2009
Interest and investment income	$	21,741	$	4,640	$	44,908		$	11,488
Investment gains, net		1,980		6		824			96
Gains/(losses) on sales of marketable equity securities		—		66,684		(1,054	)		66,684
Other		862		680		(5,430	)		(1,298	)

Total other income, net	$	24,583	$	72,010	$	39,248		$	76,970

Interest and investment income consist of income earned from cash in bank accounts and investments made in marketable debt securities and money market funds.

Investment gains, net include gains/losses from sales of marketable debt securities and/or investments in privately held companies.

Gains/losses on sales of marketable equity securities include gains/losses from sales of publicly traded companies. In May 2009, the Company tendered all of its Gmarket shares for net proceeds of $120 million. The Company recorded a pre-tax gain of $67 million ($40 million after tax).

Other consists mainly of imputed interest related to the adoption of FSP APB 14-1 “Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-1”) and foreign exchange gains and losses due to re-measurement of monetary assets and liabilities denominated in non-functional currencies. See Note 9 — “Debt” for additional information related to the adoption of FSP APB 14-1.

Note 7 COMPREHENSIVE INCOME

Note 7 COMPREHENSIVE INCOME

Comprehensive income, net of taxes, is comprised of (in thousands):


	Three Months Ended						Six Months Ended
	June 30, 2008			June 30, 2009			June 30, 2008			June 30, 2009
Net income	$	132,375		$	143,040		$	669,140		$	261,735
Change in net unrealized gains/(losses) on available-for-sale securities, net of tax and reclassification adjustments		1,115			(7,073	)		(1,247	)		(7,401	)
Foreign currency translation adjustments		107,351			15,653			238,783			97,769

Other comprehensive income		108,466			8,580			237,536			90,368

Comprehensive income		240,841			151,620			906,676			352,103
Less: Comprehensive income attributable to noncontrolling interests		(1,214	)		(1,653	)		(1,139	)		(2,790	)

Comprehensive income attributable to Yahoo! Inc.	$	239,627		$	149,967		$	905,537		$	349,313

The following table summarizes the components of accumulated other comprehensive income (in thousands):


	December 31, 2008		June 30, 2009
Unrealized gain/(loss) on available-for-sale securities, net of tax	$	6,857	$	(544	)
Foreign currency translation, net of tax		113,419		211,188

Accumulated other comprehensive income	$	120,276	$	210,644

Note 8 INVESTMENTS

Note 8 INVESTMENTS

The following tables summarize the investments in available-for-sale securities (in thousands):


	December 31, 2008
	Gross Amortized Costs		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U.S. Government and agency securities	$	935,025	$	1,602	$	—		$	936,627
Municipal bonds		47,687		55		—			47,742
Corporate debt securities		247,554		739		(2,985	)		245,308
Corporate equity securities^(*)		68,745		17,884		—			86,629

Total investments in available-for-sale securities	$	1,299,011	$	20,280	$	(2,985	)	$	1,316,306


	June 30, 2009
	Gross Amortized Costs		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U.S. Government and agency securities	$	1,234,104	$	750	$	(25	)	$	1,234,829
Municipal bonds		525,622		741		(35	)		526,328
Corporate debt securities and commercial paper		152,476		422		(692	)		152,206

Total investments in available-for-sale securities	$	1,912,202	$	1,913	$	(752	)	$	1,913,363

Reported as:


	December 31, 2008		June 30, 2009
Short-term marketable debt securities	$	1,159,691	$	1,594,226
Long-term marketable debt securities		69,986		319,137
Other assets^(*)		86,629		—

Total	$	1,316,306	$	1,913,363

^(*)	These balances included the Company’s investment in Gmarket as part of other long-term assets in the condensed consolidated balance sheet at December 31, 2008 and disposed of in May 2009.

Available-for-sale securities included in cash and cash equivalents on the condensed consolidated balance sheets are not included in the table above as the gross unrealized gains and losses were immaterial for both 2008 and the six months ended June 30, 2009 as the carrying value approximates fair value because of the short maturity of those instruments.

The contractual maturities of available-for-sale marketable debt securities were as follows (in thousands):


	December 31, 2008		June 30, 2009
Due within one year	$	1,159,691	$	1,594,226
Due after one year through five years		69,986		319,137

Total available-for-sale marketable debt securities	$	1,229,677	$	1,913,363

The following tables show all investments in an unrealized loss position for which an other-than-temporary impairment has not been recognized and the related gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position (in thousands):


	December 31, 2008
	Less than 12 Months					12 Months or Greater					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Total investments in available-for-sale securities^(*)	$	72,585	$	(2,521	)	$	18,640	$	(464	)	$	91,225	$	(2,985	)

^(*)	Consists of corporate debt securities.


	June 30, 2009
	Less than 12 Months					12 Months or Greater					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
U.S. Government and agency securities	$	127,118	$	(25	)	$	—	$	—		$	127,118	$	(25	)
Municipal bonds		114,581		(35	)		—		—			114,581		(35	)
Corporate debt securities		47,797		(10	)		20,897		(682	)		68,694		(692	)

Total investments in available-for-sale securities	$	289,496	$	(70	)	$	20,897	$	(682	)	$	310,393	$	(752	)

The Company’s investment portfolio consists of liquid government, agency, municipal, and high-quality fixed-income corporate securities. Investments in both fixed rate and floating rate interest earning instruments carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Fixed income securities may have their fair market value adversely impacted 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 requirement and no current intent to sell these securities. The Company expects to recover up to (or beyond) the initial cost of investment.

SFAS 157 establishes a framework for measuring fair value and expands disclosures about fair value measurements by establishing a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under SFAS 157 are described below:

Basis of Fair Value Measurement


Level 1		Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2		Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the asset or the liability; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3		Unobservable inputs reflecting the Company’s own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

The following table sets forth the financial assets, measured at fair value as of June 30, 2009 (in thousands):


	Fair Value Measurements at Reporting Date Using
Assets	Level 1		Level 2		Total
Money market funds^(*)	$	1,043,069	$	—	$	1,043,069
Available for sale securities:^(*)
U.S. Government and agency securities		—		1,719,899		1,719,899
Municipal bonds		—		536,591		536,591
Commercial paper		—		171,570		171,570
Corporate debt securities		—		70,495		70,495

Total assets at fair value	$	1,043,069	$	2,498,555	$	3,541,624

^(*)	The money market funds, U.S. government and agency securities, municipal bonds, commercial paper, and corporate debt securities are classified as part of either cash and cash equivalents or investments in marketable debt securities in the condensed consolidated balance sheets.

The amount of cash and cash equivalents as of June 30, 2009 includes $655 million in cash deposited with commercial banks.

The fair value of the Company’s Level 1 financial assets are based on quoted market prices of the identical underlying security. The fair value of the Company’s Level 2 financial assets are obtained from readily-available pricing sources for the identical underlying security that may not be actively traded. As of June 30, 2009, the Company did not have any significant Level 3 financial assets or liabilities.

Note 9 DEBT

Note 9 DEBT

In April 2003, the Company issued $750 million of the Notes due April 1, 2008, resulting in net proceeds to the Company of approximately $733 million after transaction fees of $17 million, which had been deferred and were included on the condensed consolidated balance sheets in prepaid expense and other current assets. As of March 31, 2008, the transaction fees were fully amortized. The Notes were issued at par, did not bear interest, and were convertible into shares of the Company’s common stock. Upon conversion, the Company had the right to deliver cash in lieu of common stock.

During the three months ended March 31, 2008, $167 million of the Notes were converted and 8.1 million shares of Yahoo! common stock were issued to the holders of the Notes. On the maturity date of April 1, 2008, the remaining $583 million of the Notes were converted and 28.5 million shares of Yahoo! common stock were issued to the holders of the Notes.

Effective January 1, 2009, the Company adopted FSP APB 14-1 and accordingly prior periods have been restated. For convertible debt instruments within the scope of FSP APB 14-1, the proceeds from the instrument’s issuance must be allocated between the liability and equity components in a manner that reflects interest cost based upon the Company’s borrowing rate at the date of issuance of the convertible debt for a similar debt instrument without the debt conversion feature. The borrowing rate was estimated to be 5 percent for the liability component of the Notes. This effective interest rate was used to calculate the fair value of the Notes using a present value approach and the accretion of interest expense over the life of the Notes.

Upon adoption of FSP APB 14-1, the Company recorded the change in accounting principle as a cumulative effect adjustment to the opening balance of retained earnings as of January 1, 2007 totaling $69 million which represented imputed interest, net of taxes, for the period from issuance to January 1, 2007. The corresponding increase in additional paid-in capital as of January 1, 2007 was $95 million. Imputed interest, which is net of $66 million in taxes, recorded over the life of the Notes resulted in a reduction in retained earnings of $95 million and a corresponding increase in additional paid-in capital of $95 million as of the maturity date.

The interest expense imputed for the three and six months ended June 30, 2008 was nil and $9 million, respectively, which is included in other income, net on the condensed consolidated statements of income. There was no impact on basic net income per share for the three months ended June 30, 2008. The impact on basic net income per share for the six months ended June 30, 2008 was $0.01. See Note 2 — “Basic and Diluted Net Income per Share Attributable to Yahoo! Inc. Common Stockholders” for additional information.

Note 10 STOCK-BASED COMPENSATION

Note 10 STOCK-BASED COMPENSATION

1995 Stock Plan. The Company’s Board of Directors previously adopted an amended and restated version of the Yahoo! Inc. 1995 Stock Plan (the “Restated 1995 Plan”), subject to approval of the amendments by the Company’s stockholders. At the Company’s annual meeting of stockholders held on June 25, 2009, the Company’s stockholders approved the Restated 1995 Plan. Among other things, the Restated 1995 Plan reflects amendments to (i) increase the number of shares of the Company’s common stock available for award grants under the Restated 1995 Plan by 50,000,000 shares (so that a maximum of 754,000,000 shares of the Company’s common stock may be issued or delivered pursuant to awards granted under the Restated 1995 Plan); (ii) change the share-counting provisions so that each share issued in respect of restricted stock and other “full-value” awards under the Restated 1995 Plan will count as 1.75 shares against the share limits; (iii) extend the Company’s ability to grant new awards under the Restated 1995 Plan until April 2, 2019; and (iv) extend the Company’s authority to grant awards under the Restated 1995 Plan intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the U.S. Internal Revenue Code through the 2014 annual meeting of stockholders as well as to grant such performance-based awards that would be payable only in cash and to approve the performance criteria listed in Appendix A to the Restated 1995 Plan for use in connection with such performance-based awards.

1996 Employee Stock Purchase Plan. The Company’s Board of Directors previously approved an amended and restated version of the Company’s 1996 Employee Stock Purchase Plan (the “Restated Purchase Plan”), subject to approval of the amendments by the Company’s stockholders. At the Company’s annual meeting of stockholders held on June 25, 2009, the Company’s stockholders approved the Restated Purchase Plan. Among other things, the Restated Purchase Plan reflects amendments to (i) increase the number of shares authorized for issuance under the Restated Purchase Plan by 30,000,000 shares (so that the maximum aggregate number of shares that may be issued under the Restated Purchase Plan would increase to 75,000,000 shares); and (ii) extend the term of the Restated Purchase Plan so that no new offering period would commence after May 10, 2029. The weighted average exercise price in connection with the May 2009 purchase was $10.09 per share. As of June 30, 2009, there was $49 million of unamortized stock-based compensation costs related to the Restated Purchase Plan which will be recognized over a weighted average period of 1.1 years.

Stock Options. The Company’s Restated 1995 Plan and other stock-based award plans assumed through acquisitions are collectively referred to as the “Plans”. Stock option activity under the Company’s Plans and the Directors’ Plan for the six months ended June 30, 2009 is summarized as follows (in thousands, except per share amounts):


	Shares		Weighted Average Exercise Price
Outstanding at December 31, 2008	135,442		$	30.10
Options granted	26,396		$	12.44
Options exercised^(*)	(2,932	)	$	8.01
Options expired	(14,382	)	$	36.12
Options cancelled/forfeited	(7,888	)	$	26.44

Outstanding at June 30, 2009	136,636		$	26.76

^(*)	The Company issued new shares to satisfy stock option exercises.

As of June 30, 2009, there was $285 million of unrecognized stock-based compensation cost related to unvested stock options which is expected to be recognized over a weighted average period of 2.4 years.

The Company determines the grant-date fair value of stock options, including the options granted under the Company’s Restated Purchase Plan using a Black-Scholes model, unless the options are subject to market conditions, in which case the Company uses a Monte Carlo simulation model. The Monte Carlo simulation model utilizes multiple input variables to estimate the probability that market conditions will be achieved. The following weighted average assumptions were used in determining the fair value of option grants using the Black-Scholes option pricing model:


	Stock Options				Purchase Plan
	Three Months Ended				Three Months Ended
	June 30, 2008		June 30, 2009		June 30, 2008		June 30, 2009
Expected dividend yield	0.0	%	0.0	%	0.0	%	0.0	%
Risk-free interest rate	3.1	%	2.0	%	2.9	%	3.3	%
Expected volatility	37.5	%	48.4	%	33.1	%	52.5	%
Expected life (in years)	4.00		4.00		1.15		1.50



	Stock Options				Purchase Plan
	Six Months Ended				Six Months Ended
	June 30, 2008		June 30, 2009		June 30, 2008		June 30, 2009
Expected dividend yield	0.0	%	0.0	%	0.0	%	0.0	%
Risk-free interest rate	2.7	%	1.8	%	2.9	%	2.9	%
Expected volatility	34.4	%	52.8	%	33.1	%	62.1	%
Expected life (in years)	3.94		4.00		1.15		1.32

Restricted stock awards and restricted stock units activity for the six months ended June 30, 2009 is summarized as follows (in thousands, except per share amounts):


	Shares		Weighted Average Grant Date Fair Value
Unvested at December 31, 2008	31,133		$	27.97
Granted^(*)	15,721		$	12.51
Vested	(5,825	)	$	30.43
Forfeited	(4,641	)	$	24.98

Unvested at June 30, 2009	36,388		$	21.28

^(*)	The Company has included the maximum number of shares issuable under the Company’s performance-based executive incentive restricted stock units.

During the six months ended June 30, 2009, 5.8 million previously granted restricted stock awards and restricted stock units vested. A majority of these vested restricted stock awards and restricted stock units were net share settled. The Company withheld 2 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 Company then remitted cash to the appropriate taxing authorities.

Total payments for the employees’ tax obligations to the relevant taxing authorities were $27 million for the six months ended June 30, 2009 and are reflected as a financing activity within the condensed consolidated statements of cash flows. Upon the vesting of shares of certain restricted stock awards, 0.2 million shares were reacquired by the Company to satisfy the related tax withholding obligations and $2 million was recorded as treasury stock. Payments of $25 million related to the net share settlement of 2 million shares of restricted stock units had the effect of share repurchases by the Company as they reduced the number of shares that would have otherwise been issued on the vesting date and were recorded as a reduction of additional paid-in capital.

During the six months ended June 30, 2008, 6 million previously granted restricted stock awards and restricted stock units vested. A majority of these vested restricted stock awards and restricted stock units were net share settled such that the Company withheld shares with value equivalent to the employees’ minimum statutory obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. The total shares withheld of approximately 2 million were based on the value of the restricted stock awards on their vesting date as determined by the Company’s closing stock price.

Total payments for the employees’ tax obligations to the relevant taxing authorities were $57 million for the six months ended June 30, 2008 and are reflected as a financing activity within the condensed consolidated statements of cash flows. Upon the vesting of shares of certain restricted stock awards, 0.7 million shares were reacquired by the Company to satisfy the tax withholding obligations and $20 million was recorded as treasury stock. Payments of $37 million related to net share settlements of restricted stock units had the effect of share repurchases by the Company as they reduced the number of shares that would have otherwise been issued as a result of the vesting and were recorded as a reduction of additional paid-in-capital.

As of June 30, 2009, there was $329 million of unrecognized stock-based compensation cost related to unvested restricted stock awards and restricted stock units which is expected to be recognized over a weighted average period of 2.3 years.

CEO Inducement Option and Make-up Equity. On January 30, 2009, Carol Bartz, the Company’s Chief Executive Officer, was granted a stock option covering 5.0 million shares of the Company’s common stock, with a per share exercise price of $11.73 (the closing price of the common stock on the grant date) and a maximum term of seven years (“Inducement Option”). Vesting of the Inducement Option is dependent on whether the average closing price for the Company’s common stock for twenty consecutive trading days prior to January 1, 2013 (or the price immediately preceding a change in control of the Company if it occurs pursuant to an agreement signed before that date) exceeds certain levels that range from 150 percent to 300 percent ($17.60 to $35.19) of Yahoo!’s closing stock price on the date of grant of the Inducement Option. Any shares acquired by Ms. Bartz upon exercise of the Inducement Option must be held until January 1, 2013, except in the event of her death or a change in control. The Company determined the grant-date fair value of the Inducement Option to be $27 million and the weighted average derived requisite service period of the award to be 1.2 years. The grant-date fair value of the Inducement Option will be expensed over the weighted average derived requisite service period.

In addition, to compensate Ms. Bartz for the forfeiture of the value of equity grants and post-employment medical coverage from her previous employer, the Company granted Ms. Bartz an award comprised of $2.5 million in cash and restricted stock with a grant-date fair value of $7.5 million, which will vest in four equal quarterly installments in 2009 (the “Make-Up Grant”). The Make-Up Grant is subject to certain clawback provisions in the event of a termination of Ms. Bartz’s employment by the Company for cause or by Ms. Bartz without good reason (as those terms are defined in her employment agreement) during the term of the employment agreement. The value of the Make-Up Grant will be expensed ratably through 2009.

Performance-Based Executive Incentive Restricted Stock Units. In February 2009, the Compensation Committee approved long-term performance-based incentive equity awards to Ms. Bartz and other senior officers, including two types of restricted stock units that vest based on the Company’s achievement of certain performance goals. The first type of restricted stock unit generally will vest on the third anniversary of the grant date based on the Company’s attainment of certain annual operating cash flow targets as well as the executive’s continued employment through that vesting date. The second type of restricted stock unit generally will vest following the third anniversary of the grant date based on the Company’s attainment of certain levels of total stockholder return relative to the returns for the NASDAQ 100 Index companies as well as the executive’s continued employment through that vesting date. For both types of restricted stock units, 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 target. The amount of stock-based compensation recorded for the first type of restricted stock unit will vary depending on the Company’s attainment of the operating cash flow target and the completion of the service period. The amount of stock-based compensation recorded for the second type of restricted stock unit will vary depending only on the completion of the service period. The aggregate fair value of these two types of restricted stock units on the date of grant of $3 million and $13 million, respectively, will be recognized over the three-year service periods.

Treasury Shares. Retirement of treasury stock is recorded as a reduction of common stock, additional paid-in-capital, and retained earnings, as applicable. As of May 31, 2009, the Company’s Board of Directors approved the retirement of approximately 209 million treasury shares, resulting in reductions of $0.2 million in common stock, $1.5 billion in additional paid-in-capital, and $3.8 billion in retained earnings.

Note 11 COMMITMENTS AND CONTINGENCIES

Note 11 COMMITMENTS AND CONTINGENCIES

Lease Commitments. The Company leases office space and data centers under operating lease agreements with original lease periods of up to 23 years, expiring between 2009 and 2027.

A summary of gross and net lease commitments as of June 30, 2009 is as follows (in millions):


	Gross Operating Lease Commitments		Sublease Income			Net Operating Lease Commitments
Six months ending December 31, 2009	$	82	$	(2	)	$	80
Years ending December 31,
2010		145		(2	)		143
2011		120		(2	)		118
2012		102		(1	)		101
2013		92		—			92
2014		84		—			84
Due after 5 years		230		—			230

Total gross and net lease commitments	$	855	$	(7	)	$	848


	Capital Lease Commitment
Six months ending December 31, 2009	$	3
Years ending December 31,
2010		7
2011		7
2012		7
2013		8
2014		8
Due after 5 years		39

Gross lease commitment	$	79

Less: interest		(36	)

Net lease commitment	$	43

Affiliate Commitments. In connection with contracts to provide advertising services to Affiliates, the Company is obligated to make payments, which represent traffic acquisition costs (“TAC”), to its Affiliates. As of June 30, 2009, these commitments totaled $220 million, of which $60 million will be payable in the remainder of 2009, $131 million will be payable in 2010, and $29 million will be payable in 2011.

Intellectual Property Rights. The Company is committed to make certain payments under various intellectual property arrangements of up to $47 million through 2023.

Other Commitments. In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to customers, vendors, lessors, joint ventures and business partners, purchasers of assets or subsidiaries and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company’s breach of agreements or representations and warranties made by the Company, services to be provided by the Company, intellectual property infringement claims made by third parties or, with respect to the sale of assets or a subsidiary, matters related to the Company’s conduct of the business and tax matters prior to the sale. In addition, the Company has entered into indemnification agreements with its directors and certain of its officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The Company has also agreed to indemnify certain former officers, directors, and employees of acquired companies in connection with the acquisition of such companies. The Company maintains director and officer insurance, which may cover certain liabilities arising from its obligation to indemnify its directors and officers, and former directors and officers of acquired companies, in certain circumstances. It is not possible to determine the aggregate maximum potential loss under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Such indemnification agreements might not be subject to maximum loss clauses. Historically, the Company has not incurred material costs as a result of obligations under these agreements and it has not accrued any liabilities related to such indemnification obligations in its condensed consolidated financial statements.

As of June 30, 2009, the Company did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, the Company is not exposed to any financing, liquidity, market, or credit risk that could arise if the Company had engaged in such relationships. In addition, the Company identified no variable interests currently held in entities for which it is the primary beneficiary.

Contingencies. From time to time, third-parties assert patent infringement claims against Yahoo!. Currently, the Company is engaged in lawsuits regarding patent issues and has been notified of other potential patent disputes. In addition, from time to time, the Company is subject to other legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of trademarks, copyrights, trade secrets, and other intellectual property rights, claims related to employment matters, and a variety of other claims, including claims alleging defamation, invasion of privacy, or similar claims arising in connection with the Company’s e-mail, message boards, auction sites, shopping services, and other communications and community features.

On May 24, 2001, Arista Records, Inc., Bad Boy Records, BMG Music d/b/a The RCA Records Label (“BMG”), Capitol Records, Inc., Virgin Records America, Inc., Sony Music Entertainment, Inc., UMG Recordings, Inc., Interscope Records, Motown Record Company, L.P., and Zomba Recording Corporation filed a lawsuit alleging copyright infringement against LAUNCH Media, Inc. (“LAUNCH”) in the U.S. District Court for the Southern District of New York seeking declaratory and injunctive relief and damages. The plaintiffs alleged, among other things, that the consumer-influenced portion of LAUNCH’s LAUNCHcast service is “interactive” within the meaning of Section 114 of the Copyright Act and therefore does not qualify for the compulsory license provided for by the Copyright Act. Yahoo! acquired LAUNCH in August 2001. This lawsuit was settled with all plaintiffs, other than BMG. On April 27, 2007, after a two week jury trial, the jury returned a unanimous verdict in favor of LAUNCH finding no liability. On March 17, 2009, the U.S. Court of Appeals for the Second Circuit heard BMG’s appeal of the trial verdict. The Company is awaiting a decision on the appeal.

On July 12, 2001, the first of several purported securities class action lawsuits was filed in the U.S. District Court for the Southern District of New York against certain underwriters involved in Overture Services Inc.’s (“Overture”) IPO, Overture, and certain of Overture’s former officers and directors. The Court consolidated the cases against Overture. Plaintiffs allege, among other things, violations of the Securities Act of 1933 and the Securities Exchange Act of 1934 (the “Exchange Act”) involving undisclosed compensation to the underwriters, and improper practices by the underwriters, and seek unspecified damages. Similar complaints were filed in the same court against numerous public companies that conducted IPOs of their common stock since the mid-1990s. All of these lawsuits were consolidated for pretrial purposes before Judge Shira Scheindlin. On April 1, 2009, the parties filed a motion with the Court for preliminary approval of a stipulated global settlement. On June 10, 2009, the Court entered an order granting preliminary approval of the settlement, ordered that notice be given to the class members, and scheduled the final approval hearing for September 10, 2009.

In May 2007, two purported class actions were commenced by plaintiffs Ellen Brodsky and Manfred Hacker, asserting claims arising under the federal securities laws against the Company and certain individual defendants. These actions were ordered consolidated in the U.S. District Court for the Central District of California, and on December 21, 2007, a Consolidated Amended Complaint was filed against Yahoo! and certain individual defendants, including current and former officers and a former director and officer. Plaintiffs purport to represent a class of persons who purchased the Company’s common stock between April 8, 2004 and July 18, 2006. Plaintiffs allege that defendants engaged in a scheme to inflate the Company’s stock price by making false and misleading statements regarding the Company’s operations, financial results, and future business prospects in violation of Section 10(b) of the Exchange Act and SEC Rule 10b-5. Plaintiffs also allege that the individual defendants engaged in insider trading in violation of Section 20(A) of the Exchange Act, and as control persons are subject to liability under Section 20(A) of the Exchange Act. Plaintiffs seek compensatory damages, injunctive relief, disgorgement of alleged insider trading proceeds, and other equitable relief. On March 10, 2008, the Court granted defendants’ motion to transfer the action to the U.S. District Court for the Northern District of California. Plaintiffs filed their Second Amended Consolidated Complaint on December 19, 2008. On June 18, 2009, the Court granted defendants’ motion to dismiss and entered judgment on the merits, dismissing the Second Amended Consolidated Complaint without leave to amend.

On June 14, 2007, a stockholder derivative action was filed in the U.S. District Court for the Central District of California by Jill Watkins against members of the Board and selected officers. The complaint filed by the plaintiff alleged breaches of fiduciary duties and corporate waste, similar to the allegations in the Brodsky/Hacker class action litigation, and violation of Section 10(b) of the Exchange Act. Watkins agreed to coordinate her action with the federal class action litigation involving plaintiffs Brodsky/Hacker. The action was transferred to the U.S. District Court for the Northern District of California on April 29, 2008. On June 18, 2009, the Court granted leave to the plaintiff Watkins to file an amended complaint and ordered that the amended complaint be filed forthwith. On July 16, 2009, the plaintiff Watkins voluntarily dismissed the action against all defendants without prejudice. On July 17, 2009, plaintiff Miguel Leyte-Vidal, who had previously substituted in as plaintiff prior to the dismissal of the federal Watkins action, re-filed a shareholder derivative action in Santa Clara County Superior Court against members of the Board and selected officers. The Santa Clara County Superior Court derivative action purports to assert causes of action on behalf of the Company for violation of California Corporations Code, for breaches of fiduciary duty regarding financial accounting and insider selling and for unjust enrichment.

Plaintiff Congregation Beth Aaron voluntarily dismissed an action filed in Santa Clara County Superior Court and on December 3, 2008 re-filed in the U.S. District Court for the Northern District of California alleging claims for breach of fiduciary duty and corporate waste in connection with Yahoo!’s consideration of proposals by Microsoft to purchase all or a part of Yahoo!, adoption of severance plans, and the June 12, 2008 agreement between Google Inc. and Yahoo!. Plaintiff filed an amended complaint on February 20, 2009. The complaint also alleges claims under Section 14(a) of the Exchange Act for alleged false statements or omissions in Yahoo!’s June 9, 2008 proxy statement regarding the severance plans and for control person liability under Section 20(a) of the Exchange Act, and also alleges that the defendants’ decision to settle similar Microsoft-related Delaware lawsuits constituted an independent breach of fiduciary duty. The complaint seeks unspecified compensatory damages, injunctive relief, and an award of plaintiffs’ attorneys’ fees and costs. On June 15, 2009, the Court granted defendants’ motion to dismiss all of Congregation Beth Aaron’s claims without leave to amend.

While the outcome of these matters is currently not determinable, the Company does not believe, based on current knowledge, that any of the foregoing legal proceedings or claims is likely to have a material adverse effect on its financial position, results of operations, or cash flows. In the event of a determination adverse to Yahoo!, its subsidiaries, directors, or officers, in these matters, however, the Company may incur substantial monetary liability, and be required to change its business practices. Either of these could have a material adverse effect on the Company’s financial position, results of operations, or cash flows. The Company may also incur substantial expenses in defending against these claims.

Note 12 SEGMENTS

Note 12 SEGMENTS

The Company manages its business geographically. The primary areas of measurement and decision-making are the U.S. and International. Management relies on an internal management reporting process that provides revenue and segment operating income before depreciation, amortization, and stock-based compensation expense for making financial decisions and allocating resources.

The following tables present summarized information by segment (in thousands):


	Three Months Ended						Six Months Ended
	June 30, 2008			June 30, 2009			June 30, 2008			June 30, 2009
Revenues by segment:
United States	$	1,262,191		$	1,152,393		$	2,567,531		$	2,340,323
International		535,894			420,504			1,048,156			812,616

Total revenues	$	1,798,085		$	1,572,897		$	3,615,687		$	3,152,939


Segment operating income before depreciation, amortization, and stock-based compensation expense:
United States	$	295,537		$	268,205		$	608,630		$	560,937
International		131,509			117,239			251,549			233,485

Total segment operating income before depreciation, amortization, and stock-based compensation expense		427,046			385,444			860,179			794,422
Depreciation and amortization		(203,357	)		(204,765	)		(390,868	)		(386,338	)
Stock-based compensation expense		(123,168	)		(104,926	)		(248,173	)		(231,646	)

Income from operations	$	100,521		$	75,753		$	221,138		$	176,438


Capital expenditures, net:
United States	$	152,731		$	84,553		$	276,199		$	141,918
International		23,166			10,121			39,491			23,237

Total capital expenditures, net	$	175,897		$	94,674		$	315,690		$	165,155


							December 31, 2008			June 30, 2009
Property and equipment, net:
United States							$	1,396,031		$	1,303,621
International								140,150			126,756

Total property and equipment, net							$	1,536,181		$	1,430,377

The following table presents revenues for groups of similar services (in thousands):


	Three Months Ended				Six Months Ended
	June 30, 2008		June 30, 2009		June 30, 2008		June 30, 2009
Marketing services:
Owned and Operated sites	$	1,015,688	$	858,160	$	1,981,328	$	1,730,063
Affiliate sites		571,268		519,690		1,178,072		1,030,968

Marketing services		1,586,956		1,377,850		3,159,400		2,761,031
Fees		211,129		195,047		456,287		391,908

Total revenues	$	1,798,085	$	1,572,897	$	3,615,687	$	3,152,939

Note 13 INCOME TAXES

Note 13 INCOME TAXES

The effective tax rates for the three and six months ended June 30, 2009 were 47 percent and 41 percent, respectively, compared to 38 percent and 39 percent for the same periods in 2008. The effective tax rates for the three and six months ended June 30, 2009 differ from the statutory federal income tax rate of 35 percent primarily due to state taxes, the effect of non-U.S. operations and non-deductible stock-based compensation expense. The effective tax rate for the six months ended June 30, 2009 was also impacted by a one-time tax benefit related to a California state tax law change that was enacted in the first quarter.

The Company’s total amount of unrecognized tax benefits as of June 30, 2009 is $801 million, of which $363 million is recorded as deferred and other long-term tax liabilities, net on the condensed consolidated balance sheet. The total unrecognized tax benefits as of June 30, 2009 increased by $3 million from the balance as of December 31, 2008.

On May 27, 2009, the United States Court of Appeals for the Ninth Circuit Court issued its ruling in the case of Xilinx Inc. v. Commissioner, holding that stock-based compensation expense is required to be included in certain transfer pricing arrangements between a U.S. company and its offshore subsidiaries. The Company believes it has adequately provided for the impact of the Xilinx ruling as well as for any potential adjustments that may result from tax audits. However, the final outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income tax in the period such resolution occurs.

The Company’s federal and California income tax returns for the years ended December 31, 2005 and 2006 are currently under examination by the Internal Revenue Service and the California Franchise Tax Board.

Note 14 RESTRUCTURING CHARGES, NET

Note 14 RESTRUCTURING CHARGES, NET

Restructuring charges, net was comprised of the following (in thousands):


	Three Months Ended					Six Months Ended
	June 30, 2008		June 30, 2009			June 30, 2008			June 30, 2009
Employee severance pay and related costs	$	—	$	30,389		$	29,169		$	32,198
Non-cancelable lease, contract termination, and other charges		—		42,213			—			45,205

Sub-total before reversal of stock-based compensation expense		—		72,602			29,169			77,403
Reversal of stock-based compensation expense for forfeitures		—		(7,600	)		(12,284	)		(7,600	)

Restructuring charges, net	$	—	$	65,002		$	16,885		$	69,803

Q108 Restructuring Plan. During the three months ended March 31, 2008, the Company implemented a strategic workforce realignment to more appropriately allocate resources to its key strategic initiatives. The Company incurred total pre-tax cash charges of nil and approximately $29 million in severance pay expenses and related cash expenses during the three and six months ended June 30, 2008, respectively, in connection with this workforce realignment. 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. The strategic workforce realignment was completed during the fourth quarter of 2008. Of the $17 million restructuring charges, net recorded in the six months ended June 30, 2008, $13 million was related to the U.S. segment and $4 million was related to the International segment.

Q408 Restructuring Plan. During the three months ended December 31, 2008, the Company implemented additional cost reduction initiatives, including a workforce reduction and consolidation of certain real estate facilities. The Company incurred charges for severance benefits provided and facilities vacated of $42 million and $47 million during the three and six months ended June 30, 2009, respectively, in connection with the continued implementation of these initiatives. The charge for the three months ended June 30, 2009 included approximately $11 million relating to the change in estimates for sublease income assumptions for facilities which were exited in prior periods, as well as $7 million relating to the write off of leasehold improvements, furniture and fixed assets relating to exited facilities. Net charges under the Q408 restructuring plan relating to the U.S. segment were $40 million and $46 million for the three and six months ended June 30, 2009, respectively. Net charges under the Q408 restructuring plan relating to the International segment were $2 million and $1 million for the three and six months ended June 30, 2009, respectively.

Q209 Restructuring Plan. During the three months ended June 30, 2009, the Company implemented new cost initiatives to further reduce the Company’s worldwide workforce by approximately 5 percent. The Company incurred total pre-tax cash charges of approximately $31 million in severance and other related costs during the three months ended June 30, 2009. The pre-tax cash charges were offset by an $8 million credit related to non-cash stock-based compensation expense reversals for unvested stock awards that were forfeited. Of the $23 million restructuring charges, net recorded in the three months ended June 30, 2009, $15 million related to the U.S. segment and $8 million related to the International segment.

Restructuring Accruals. As of June 30, 2009, the aggregate outstanding restructuring liability with respect to the cost reduction initiatives was $86 million, of which $30 million relates to employee severance pay expenses which the Company expects to substantially pay out by the end of fiscal year 2009, and $56 million relates to non-cancelable lease costs which the Company expects to pay over the terms of the related obligations which extend to the end of fiscal year 2017.

The activity in the Company’s restructuring accruals as of June 30, 2009 is summarized as follows (in thousands):


	Q408 Restructuring Plan			Q209 Restructuring Plan			Total
Balance as of January 1, 2009	$	89,887		$	—		$	89,887

Employee severance pay and related costs		4,532			30,447			34,979
Reversal of stock-based compensation expense		—			(7,600	)		(7,600	)
Non-cancelable lease, contract termination, and other charges^(*)		39,251			—			39,251
Write-off of leasehold improvements, furniture, and fixed assets		7,024			—			7,024
Reversal of previous charges		(3,851	)		—			(3,851	)

Restructuring charges, net for the six months ended June 30, 2009	$	46,956		$	22,847		$	69,803
Cash paid		(70,711	)		(11,211	)		(81,922	)
Non-cash reversal of stock-based compensation expense		—			7,600			7,600
Non-cash adjustments		180			427			607

Balance as of June 30, 2009	$	66,312		$	19,663		$	85,975

^(*)	Includes $1 million in professional services relating to the restructuring

Restructuring accruals by segment consisted of the following (in thousands):


	December 31, 2008		June 30, 2009
United States	$	68,410	$	65,873
International		21,477		20,102

Total restructuring accruals	$	89,887	$	85,975

Note 15 SUBSEQUENT EVENTS

Note 15 SUBSEQUENT EVENTS

On July 29, 2009, Yahoo! entered into a binding letter agreement with Microsoft Corporation (“Microsoft”) under which Microsoft will be Yahoo!’s exclusive technology provider for algorithmic and paid search services and Yahoo! will become the exclusive worldwide relationship sales force for both companies’ premium search advertisers. During the 10-year term of the agreement, Yahoo! will be entitled to receive revenue sharing payments based on the net revenues generated from Microsoft’s services on Yahoo! Properties and Affiliate sites. Microsoft will acquire an exclusive 10-year license to Yahoo!’s core search technology and will have the ability to integrate Yahoo! search technology into its existing Web search platforms. The agreement does not cover either company’s Web properties and products, email, instant messaging, display advertising, or any other aspect of the companies’ businesses, and the companies will continue to compete in those areas. The transaction will be subject to regulatory review.

Entity Information (USD $)	6 Months Ended
Entity Information (USD $)	Jun. 30, 2009	Jul. 31, 2009	Jun. 30, 2008
Trading Symbol	YHOO
Entity Registrant Name	YAHOO INC
Entity Central Index Key	0001011006
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		1,403,390,107
Entity Public Float			$ 22,361,337,406

Document Information	6 Months Ended
Document Information	Jun. 30, 2009
Document Type	10-Q
Amendment Flag	false
Amendment Description	N.A.
Document Period End Date	Jun. 30, 2009