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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 12, 1999
REGISTRATION NO. 333-71645
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
YAHOO! INC.
(Exact Name of Registrant as specified in its charter)
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<S> <C>
CALIFORNIA 77-0398689
(State of incorporation) (I.R.S. Employer Identification No.)
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3420 CENTRAL EXPRESSWAY
SANTA CLARA, CALIFORNIA 95051
(408) 731-3300
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
--------------------------
GARY VALENZUELA
SENIOR VICE PRESIDENT, FINANCE AND ADMINISTRATION, AND CHIEF FINANCIAL OFFICER
3420 CENTRAL EXPRESSWAY
SANTA CLARA, CALIFORNIA 95051
(408) 731-3300
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
COPIES TO:
JOSHUA L. GREEN
KEITH A. MILLER
KEVIN G. MONTLER
Venture Law Group
A Professional Corporation
2800 Sand Hill Road
Menlo Park, California 94025
(650) 854-4488
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement until January
15, 2000 or until such earlier time that all of the shares registered hereunder
have been sold.
If the only securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
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SUBJECT TO COMPLETION, DATED MARCH 12, 1999
PROSPECTUS
[LOGO]
124,856 SHARES OF COMMON STOCK
THE SHARES OFFERED IN THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK. YOU
SHOULD CAREFULLY CONSIDER THE "RISK FACTORS" COMMENCING ON PAGE 4 IN DETERMINING
WHETHER TO PURCHASE THE COMMON STOCK.
------------------------
These shares of common stock are being offered by certain selling
shareholders, identified in this prospectus. For additional information on the
methods of sale, you should refer to the section entitled "Plan of Distribution"
on page 21. We will not receive any portion of the proceeds from the sale of
these shares.
In accordance with Rule 416(b) promulgated under the Securities Act of 1933,
the number of shares of common stock registered for sale by this prospectus
include the shares of common stock issued in connection with the two-for-one
stock split effected on February 5, 1999.
Each of the selling shareholders may be deemed to be an "Underwriter," as
such term is defined in the Securities Act of 1933.
Yahoo! Inc.'s common stock is quoted on the Nasdaq National Market under the
symbol "YHOO."
On March 11, 1999, the last sale price of the common stock on the Nasdaq
National Market was $179.00 per share.
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UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS SELLING SHAREHOLDERS
<S> <C> <C> <C>
Per Share.................................
Total..................................... See Text Above See Text Above See Text Above
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES OR PASSED ON THE
ADEQUACY OR ACCURACY OF THE DISCLOSURES IN THE PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
The date of this prospectus is March , 1999
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TABLE OF CONTENTS
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PAGE
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THE COMPANY................................................................................................ 3
RECENT DEVELOPMENTS........................................................................................ 3
RISK FACTORS............................................................................................... 4
USE OF PROCEEDS............................................................................................ 22
ISSUANCE OF COMMON STOCK TO SELLING SHAREHOLDERS........................................................... 22
PLAN OF DISTRIBUTION....................................................................................... 22
SELLING SHAREHOLDERS....................................................................................... 24
LEGAL MATTERS.............................................................................................. 25
EXPERTS.................................................................................................... 25
WHERE YOU CAN FIND MORE INFORMATION........................................................................ 25
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We have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained in this prospectus. You should
not rely on any unauthorized information. This prospectus does not offer to sell
or buy any shares in any jurisdiction in which it is unlawful. The information
in this prospectus is current as of the date on the cover.
THE COMPANY
Yahoo! Inc. is a global Internet media company that offers a branded network
of comprehensive information, communication and shopping services to millions of
users daily. As the first online navigational guide to the Web, www.yahoo.com is
a leading guide in terms of traffic, advertising, household and business user
reach, and is one of the most recognized brands associated with the Internet.
Under the Yahoo! brand, we provide broadcast media, personal communications
and direct servcies. In December 1998, Internet users viewed an average of 167
million Web pages per day in Yahoo!-branded properties.
We make our properties available without charge to users and generate
revenue primarily through the sale of advertising. Advertising on Yahoo!
properties is sold through our internal advertising sales force. During the
fourth quarter of 1998, approximately 2,225 advertisers purchased advertising on
Yahoo! properties.
Yahoo! was incorporated on March 5, 1995 under the laws of California. Our
principal executive offices are located at 3420 Central Expressway, Santa Clara,
California 95051 and our telephone number is (408) 731-3300. As used in this
prospectus, "we," "us," "our" and "Yahoo!" refer to Yahoo! Inc., a California
corporation, and its wholly owned subsidiaries.
RECENT DEVELOPMENTS
On January 28, 1999, we 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, we will
exchange approximately 21,254,000 shares of Yahoo! common stock for
approximately 31,403,000 shares of GeoCities common stock. Additionally, we 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 shareholders. We expect to record a one-time
charge in the second quarter of 1999 relating to expenses incurred with the
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.
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RISK FACTORS
RISKS RELATED TO YAHOO!
WE HAVE A LIMITED OPERATING HISTORY AND MAY NOT BE ABLE TO IMPLEMENT OUR GROWTH
STRATEGY.
Yahoo! was incorporated in March 1995 and did not begin generating
advertising revenues until August 1995. Therefore, we have a limited operating
history. Our prospects are subject to the risks, expenses and uncertainties
frequently encountered by young companies that operate exclusively in the new
and rapidly evolving markets for Internet products and services. Successfully
achieving our growth plan depends on:
- our ability to continue to develop and extend the Yahoo! brand;
- our ability to develop new media properties;
- our ability to maintain and increase the levels of traffic on Yahoo!
properties;
- our development or acquisition of services or products equal or superior
to those of our competitors;
- our ability to effectively generate revenues through sponsored services
and placements in Yahoo! properties;
- our ability to effectively integrate the technology and operations of
businesses or technologies we have acquired;
- our ability to successfully develop and offer personalized Web-based
services, such as e-mail services, to consumers without errors or
interruptions in service;
- our ability to continue to identify, attract, retain and motivate
qualified personnel;
- the adoption by the market of the Web as an advertising medium;
- the successful sale of Web-based advertising by our internal sales force;
and
- relative price stability for Web-based advertising, despite competition
and other factors that could reduce market prices for advertising.
We may not be successful in implementing our growth plan.
WE ANTICIPATE INCREASED OPERATING EXPENSES AND MAY EXPERIENCE LOSSES.
As of December 31, 1998, we had an accumulated deficit of $8,442,000.
Because of our limited operating history and the uncertain nature of the
rapidly-changing markets we serve, we believe the prediction of future results
of operations is difficult or impossible. In addition, we believe that period-
to-period comparisons of our operating results are not meaningful. You should
not rely on the results for any period as an indication of future performance.
In particular, although we experienced strong revenue growth during 1998, we do
not believe that this level of revenue growth will be sustained in future
periods. We currently expect that our operating expenses will continue to
increase significantly as we expand our sales and marketing operations, continue
to develop and extend the Yahoo! brand, fund greater levels of product
development, develop and commercialize additional media properties, and acquire
complementary businesses and technologies. As a result, we may experience
significant losses on a quarterly and annual basis.
OUR QUARTERLY OPERATING RESULTS WILL FLUCTUATE BECAUSE WE RELY ON SHORT-TERM
ADVERTISING CONTRACTS.
We derive the majority of our revenues from the sale of advertisements under
short-term contracts, which are difficult to forecast accurately. Our expense
levels are based in part on our expectations concerning future revenue and, to a
large extent, are fixed. We may be unable to adjust spending
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quickly enough to compensate for any unexpected revenue shortfall. Accordingly,
the cancellation or deferral of advertising or sponsorship contracts could have
a material adverse effect on our financial results. As noted above, we expect
our operating expenses to increase significantly over the near term. To the
extent our expenses increase but our revenues do not, our business, operating
results, and financial condition will be materially and adversely affected. If
our operating results fall below the expectations of analysts, the trading price
of our common stock may be adversely affected.
Our operating results may fluctuate significantly in the future as a result
of a variety of factors, many of which are outside our control. These factors
include:
- the level of usage of the Internet;
- demand for Internet advertising;
- the addition or loss of advertisers;
- the level of user traffic on Yahoo! online media properties;
- the advertising budgeting cycles of individual advertisers;
- the mix of types of advertising we sell (targeted advertising generally
has higher rates);
- the amount and timing of capital expenditures and other costs relating to
the expansion of our operations;
- the introduction of new products or services by us or our competitors;
- pricing changes for Internet-based advertising;
- the timing of initial set-up, engineering or development fees that may be
paid in connection with larger advertising and distribution arrangements;
- technical difficulties with respect to the use of Yahoo! or other online
media properties we develop;
- costs incurred with respect to acquisitions;
- negative general economic conditions and resulting effects on media
spending; and
- economic conditions specific to the Internet and online media.
As a strategic response to changes in the competitive environment, we may
from time to time make certain pricing, service or marketing decisions that may
adversely affect our profitability in a given quarterly or annual period.
Our advertising revenue is subject to seasonal fluctuations. Historically,
advertisers have spent less in the first and third calendar quarters. The level
of use of our online properties is also seasonal. User traffic on Yahoo! online
media properties has historically been lower during the summer and during
year-end vacation and holiday periods.
THE RATE STRUCTURE OF SOME OF OUR ADVERTISING CONTRACTS EXPOSES US TO
POTENTIALLY SIGNIFICANT FINANCIAL RISKS.
A key element of our strategy is to generate advertising revenues through
sponsored services and placements by third parties in our online media
properties in addition to banner advertising. In connection with these
arrangements, we may receive sponsorship fees as well as a portion of
transaction revenues received by the sponsor from users originated through the
Yahoo! placement, in return for
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minimum levels of user impressions to be provided by us. These arrangements
expose us to potentially significant financial risks, including the following:
- if we fail to deliver required minimum levels of user impressions or
"click throughs," our fee may be adjusted downwards;
- the sponsors may not renew the agreements at the end of their term or they
may renew at lower rates; and
- the arrangements may not generate anticipated levels of shared transaction
revenue, or sponsors may default on the payment commitments in such
agreements (as has occurred in the past).
As a result of these financial risks, we cannot guarantee that we will
achieve significant revenue from these sponsorship arrangements. In addition,
because we have limited experience with these arrangements, we are unable to
determine what effect they will have on gross margins and results of operations.
Although transaction-based fees have not to date represented a material portion
of our net revenues, if and to the extent such revenues become significant,
there could be greater variations in our quarterly operating results.
WE ARE IN A HIGHLY COMPETITIVE INDUSTRY; SOME OF OUR COMPETITORS MAY BE MORE
SUCCESSFUL THAN WE ARE IN ATTRACTING AND RETAINING CUSTOMERS.
The market for Internet products and services is highly competitive. There
are no substantial barriers to entry in these markets, and we expect that
competition will continue to intensify. Negative competitive developments could
have a material adverse effect on our business and on the trading price of our
stock.
We compete with many other providers of online navigation, information and
community services. As we expand the scope of our Internet services, we will
compete directly with a greater number of Internet sites and other media
companies across a wide range of different online services. We also compete in
vertical markets where competitors may have advantages in expertise, brand
recognition, and other factors. In addition, we compete with metasearch services
and software applications that allow a user to search the databases of several
directories and catalogs simultaneously. We also compete indirectly with
database vendors that offer information search and retrieval capabilities with
their core database products. Many companies offer competitive products or
services addressing Web navigation, information and community services,
including:
- America Online, Inc. (NetFind);
- CNET, Inc. (Snap);
- Compaq/Digital Equipment Corporation (AltaVista);
- Excite, Inc. (including WebCrawler);
- Infoseek Corporation (including Go network);
- Inktomi Corporation;
- Lycos, Inc. (including HotBot and Tripod);
- Microsoft Corporation (msn.com); and
- Netscape Communications Corporation (Netcenter).
A large number of Web sites and online services, such as the Microsoft
Network, AOL, and Netscape (Netcenter); other Web navigation companies such as
Excite, Lycos, and Infoseek; and high-
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traffic e-commerce merchants such as Amazon.com, Inc. also offer or are expected
to offer informational and community features that may be competitive with the
services we offer. For example, Netscape recently significantly enhanced its
Netcenter service as a "gateway" Web site through commercial relationships with
certain of its competitors, including Excite. A number of companies, including
Hotmail (acquired by Mircosoft) and WhoWhere? Inc. (acquired by Lycos), offer
Web-based email services similar to those we offer. These companies are expected
to continue to provide such services in tandem with larger navigational sites
and online services. AOL recently acquired Mirabilis, a provider of "ICQ"
instant Internet messaging software and services that compete with our Yahoo!
Pager service. The ICQ user base will provide AOL with an additional platform
for distribution of AOL's other navigation, information and communications
services that compete with us. Several companies, including Microsoft and AOL,
also are developing or currently offer online information services for local
markets, which compete with our regional online properties. As a result of our
acquisition of Viaweb Inc., we face competition in the market for hosting online
merchant stores, including companies such as iCat Corporation and Open Market,
Inc. We also face intense competition in international markets, including from
U.S. companies, media and online companies, Internet service providers and
telecommunications companies that are already well established in those foreign
markets and in some cases are monopolies. In order to effectively compete, we
may need to expend significant internal engineering resources or acquire other
technologies and companies to provide such capabilities. Any of these efforts
could be dilutive to our shareholders.
MARKET CONSOLIDATION MAY CREATE MORE FINANCIALLY FORMIDABLE COMPETITORS.
In the past several months, there have been a number of significant
acquisitions and strategic plans announced among and between these companies.
These include:
- The Walt Disney Company acquiring a significant interest in Infoseek;
- AOL acquiring Netscape;
- @Home Networks, a provider of high speed internet access serving the cable
television infrastructure and the largest shareholder of which is AT&T,
acquiring Excite;
- NBC acquiring an interest in Snap, a subsidiary of CNET;
- USA Networks and Ticketmaster Online-CitySearch announcing that they
intend to combine their services with Lycos; and
- Compaq, a computer manufacturer, announcing that it intends to spinoff
AltaVista into a separate independent entity through an initial public
offering.
The effect of these completed and pending acquisitions and strategic plans on
Yahoo! cannot be predicted with certainty, but all of these competitors are
aligned with companies that are significantly larger or more well established
than we are. As a result, each of them will have access to significantly greater
financial, marketing and, in certain cases, technical resources than we do. For
example, assuming that its acquisition by @Home Networks is approved, Excite
will significantly enhance its access to knowledge about broadband transmission
technology.
These acquisitions, if consummated, will also result in many of these
companies gaining access to significantly greater marketing resources. For
example, the combination of Lycos with USA Networks and Ticketmaster
Online-CitySearch will permit Lycos to access significant television and product
fulfillment resources for marketing and other purposes. In addition, Infoseek
and The Walt Disney Company recently entered into an agreement whereby Disney
gains a significant interest in Infoseek. The parties have introduced a portal
and navigation service entitled Go.com, which is supported by Disney's
substantial promotional and media resources. Similarly, Snap, by virtue of its
relationship with NBC, has and will continue to be supported by NBC's
substantial promotional and media resources. Several large
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media companies, including both Time Warner, Inc. and CBS, have announced that
they are contemplating Internet navigation services and are attempting to become
"gateway" sites for Web users. These and other competitors are expected to
continue to make substantial marketing expenditures to promote their online
properties. We may be required to increase our sales and marketing expenditures
significantly in response to these efforts, which may materially impair our
operating results and may not be successful.
The recent acquisitions noted above will result in greater competition as
they consolidate more users of the Internet on a single service and incorporate
search and retrieval features other than Yahoo! into their offerings. In
addition, providers of software and other Internet products and services are
incorporating search and retrieval features into their offerings. For example,
Web browsers offered by Netscape and Microsoft increasingly incorporate
prominent search buttons that direct search traffic to competing services. These
features could make it more difficult for Internet users to find and use our
products and services. Netscape recently announced an agreement with Excite
under which Excite will be the most prominent navigational service within the
Netcenter website. In the future, Netscape, Microsoft and other browser
suppliers may also more tightly integrate products and services similar to ours
into their browsers or their browsers' pre-set home pages. In addition, entities
that sponsor or maintain high-traffic websites or that provide an initial point
of entry for Internet users, such as the regional telephone operating companies,
long-distance providers and cable companies such as AT&T/ TCI through @Home
Networks and Excite or Internet Service Providers ("ISPs") such as Microsoft and
AOL, currently offer and could further develop, acquire or license Internet
search and navigation functions and community and communications services that
compete with those we offer. Another example is the recently announced
arrangement that will result in Compaq including prominent links to Alta Vista
with many of the computers which it sells. Any of these companies could take
actions that would make it more difficult for consumers to find and use Yahoo!
services. For example, Microsoft recently announced that it will feature and
promote Internet search services provided by Alta Vista and signed a long term
partnership with LookSmart to provide directory services in the Microsoft
Network and other Microsoft online properties. We expect that such search
services may be tightly integrated into future versions of the Microsoft
operating system, the Internet Explorer browser, and other software
applications, and that Microsoft will promote such services within the Microsoft
Network or through other Microsoft affiliated end-user services such as MSNBC or
WebTV Networks. Compaq and Microsoft may have a competitive advantage because
their Internet navigational offerings are more conveniently accessed by users.
INCREASED COMPETITION MAY EXERT DOWNWARD PRICING PRESSURE ON ADVERTISING
CONTRACTS.
We compete with online services, other website operators and advertising
networks, as well as traditional offline media such as television, radio and
print for a share of advertisers' total advertising budgets. We believe that the
number of companies selling Web-based advertising and the available inventory of
advertising space has recently increased substantially. Accordingly, we may face
increased pricing pressure for the sale of advertisements, which could reduce
our advertising revenues. In addition, our sales may be adversely affected to
the extent that our competitors offer superior advertising services that better
target users or provide better reporting of advertising results.
MANY OF OUR COMPETITORS HAVE GREATER FINANCIAL RESOURCES THAN WE DO.
Many of our existing competitors, as well as a number of potential new
competitors, have significantly greater financial, technical, marketing and
distribution resources than we do. In addition, providers of Internet tools and
services may be acquired by, receive investments from, or enter into other
commercial relationships with larger, well-established and well-financed
companies, such as Microsoft and AOL. For example, a version of the Excite
service (AOL NetFind) has been designated as the exclusive Internet search
service for use by AOL's subscribers. It is difficult to predict with certainty
what the effects will be of the acquisition of Netscape by AOL or Excite by
@Home Networks, but it
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will likely increase competitive pressures on us in several respects, including
their additional access to end users and the ability to provide a more
comprehensive offering to advertisers and sponsors. In addition,
well-established traditional media companies may acquire, invest or otherwise
establish commercial relationships with our competitors, such as NBC's recent
investment in CNET's Snap service, Disney's investment in Infoseek or USA
Network's and Ticketmaster Online--CitySearch's combination of their services
with Lycos. These larger companies may use their substantial media resources to
promote and enhance their own services. Greater competition resulting from such
relationships could have a material adverse effect on our business, operating
results, and financial condition.
WE DEPEND ON CONTINUED GROWTH IN THE USE OF THE INTERNET AND MUST ADAPT QUICKLY
TO TECHNOLOGICAL CHANGE.
Our future success is dependent upon continued growth in the use of the
Internet and the Web in order to support the sale of advertising on our online
media properties. Web-based advertising is relatively new, and it is difficult
to predict the extent of further growth, if any, in Web advertising
expenditures. The Internet may not prove to be a viable commercial marketplace
for a number of reasons, including lack of acceptable security technologies,
potentially inadequate development of the necessary infrastructure, or timely
development and commercialization of performance improvements. To the extent
that the Internet continues to experience significant growth in the number of
users and level of use, the Internet infrastructure may not be able to support
the demands placed upon it by such growth and the performance or reliability of
the Web may be adversely affected.
The market for Internet products and services is characterized by rapid
technological developments, evolving industry standards and customer demands,
and frequent new product introductions and enhancements. To the extent that
higher bandwidth Internet access becomes more widely available through cable
modems or other technologies, we may be required to make significant changes to
the design and content of our online properties in order to compete effectively.
Failure to effectively adapt to these or any other technological developments
could adversely affect our business, operating results, and financial condition.
THE MARKET FOR OUR PRODUCTS IS NEW, AND THE RATE OF MARKET ACCEPTANCE IS
UNCERTAIN.
The markets for our products and media properties have only recently begun
to develop, are rapidly evolving, and are increasingly competitive. Demand and
market acceptance for recently introduced products and services are subject to a
high level of uncertainty and risk. It is difficult for us to predict whether,
or how fast, these markets will grow. We cannot guarantee either that the market
for our products and media properties will continue to develop or that demand
for our products or media properties will be sustainable. If the market develops
more slowly than expected or becomes saturated with competitors, or if our
products and media properties do not sustain market acceptance, our business,
operating results, and financial condition will be materially and adversely
affected.
WE MUST DEVELOP AND MAINTAIN A "BRAND IDENTITY" FOR OUR PRODUCTS.
We believe that establishing and maintaining the Yahoo! brand is a critical
aspect of our efforts to attract and expand our user and advertiser base. We
also believe that the importance of brand recognition will increase due to the
growing number of Internet sites and the relatively low barriers to entry.
Promotion and enhancement of the Yahoo! brand will depend largely on our success
in providing high-quality products and services. In order to attract and retain
Internet users and to promote and maintain the Yahoo! brand, we may find it
necessary to increase expenditures devoted to creating and maintaining brand
loyalty. In the event of any breach or alleged breach of security or privacy
involving our services, or if any third party undertakes illegal or harmful
actions utilizing our community, communications or commerce services, we could
suffer substantial adverse publicity and impairment of our brand and reputation.
If we are unable to provide high-quality products and services or otherwise fail
to
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promote and maintain our brand, or if we incur excessive expenses in an attempt
to improve our products and services or promote and maintain our brand, our
business, operating results, and financial condition will be materially and
adversely affected.
BUSINESSES MAY NOT ADOPT THE WEB AS AN ADVERTISING MEDIUM.
We derive a majority of our revenues from the sale of advertisements on our
Web pages. Most of our advertising customers have limited experience with the
Web as an advertising medium. Our ability to generate significant advertising
revenues will depend upon:
- advertisers' acceptance of the Web as an effective and sustainable
advertising medium;
- the development of a large base of users of our services possessing
demographic characteristics attractive to advertisers; and
- our ability to continue to develop and update effective advertising
delivery and measurement systems.
No standards have yet been widely accepted for the measurement of the
effectiveness of Web-based advertising. We cannot guarantee that such standards
will develop sufficiently to support Web-based advertising as a significant
advertising medium. Nor can we guarantee that the advertisers will determine
that banner advertising, which comprises the majority of our revenues, is an
effective advertising medium. We may not be able to effectively transition to
any other forms of Web-based advertising, should such other forms prove more
popular. Certain advertising filter software programs are available that limit
or remove advertising from an Internet user's desktop. Such software, if
generally adopted by users, may have a materially adverse effect upon the
viability of advertising on the Internet. Our advertising customers may not
accept the internal and third-party measurements of impressions received by
advertisements on Yahoo! online media properties; such measurements may contain
errors. We rely primarily on our internal advertising sales force for domestic
advertising sales, which involves additional risks and uncertainties, including
risks associated with the recruitment, retention, management, training, and
motivation of sales personnel. As a result of these factors, we may not be able
to sustain or increase current advertising sales levels. Failure to do so will
have a material adverse effect on our business, operating results, and financial
position.
WE DEPEND UPON THIRD PARTIES FOR CRITICAL ELEMENTS OF OUR BUSINESS.
We depend substantially upon third parties for several critical elements of
our business including technology and infrastructure, content development, and
distribution activities.
TECHNOLOGY AND INFRASTRUCTURE. In May 1998, we entered into an agreement
with Inktomi under which Inktomi will provide text-based Web search results to
complement our directory and navigational guide. We will depend substantially
upon ongoing maintenance and technical support from Inktomi to ensure accurate
and rapid presentation of such search results to our customers. If Inktomi were
to prematurely terminate their agreement with us or fail to renew it, we would
have to make substantial expenditures to develop or license replacement
technology. This also could result in lower levels of use of our navigational
services. We rely on a private third-party provider, Frontier GlobalCenter,
Inc., for our principal Internet connections. Email and other service Internet
connections are provided by GTE. Any disruption in the Internet access provided
by these third-party providers or any failure of these third-party providers to
handle current or higher volumes of use could have a material adverse effect on
our business, operating results, and financial condition. We license technology
and related databases from third parties for certain elements of Yahoo!
properties, including, among others, technology underlying the delivery of news,
stock quotes and current financial information, chat services, street mapping,
telephone listings, and similar services. We have experienced and expect to
continue to experience interruptions and delays in service and availability for
such elements, including recent interruptions in our stock quote services.
Furthermore, we are dependent on hardware suppliers for prompt
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delivery, installation, and service of servers and other equipment to deliver
our products and services. Any errors, failures, or delays experienced in
connection with these third-party technologies and information services could
negatively impact our relationship with users and adversely affect our brand and
our business, and could expose us to liabilities to third parties.
CONTENT DEVELOPMENT. A key element of our strategy involves the
implementation of Yahoo!-branded media properties targeted for interest areas,
demographic groups, and geographic areas. In these efforts, we rely on content
development and localization efforts of third parties. For example, we have
entered into an agreement with Ziff-Davis under which Ziff-Davis publishes an
online publication and a print magazine under the Yahoo! brand. We also expect
to rely on third-party affiliates, including SOFTBANK in Japan and Korea to
localize, maintain, and promote these services and to sell advertising in local
markets. We cannot guarantee that our current or future third-party affiliates
will effectively implement these properties, or that their efforts will result
in significant revenue to us. Any failure of these parties to develop and
maintain high-quality and successful media properties also could hurt the Yahoo!
brand. Certain of these arrangements also require us to integrate third parties'
content with our services, which can require significant programming and design
efforts. In addition, we have granted exclusivity provisions to certain third
parties, and may in the future grant additional exclusivity provisions. Such
exclusivity provisions may have the effect of preventing us, while they are in
force, from accepting advertising or sponsorship arrangements within a
particular subject matter with respect to portions of our network of media
properties.
DISTRIBUTION RELATIONSHIPS. In order to create traffic for our online
properties and make them more attractive to advertisers and consumers, we have
certain distribution agreements and informal relationships with leading Web
browser providers such as Microsoft and Netscape, operators of online networks
and leading websites, and computer manufacturers, such as Compaq Computer and
Gateway 2000. We believe these arrangements are important to the promotion of
our online media properties, particularly among new Web users who may first
access the Web through these browsers, services, websites, or computers. Our
business relationships with these companies are intended to increase the use and
visibility of Yahoo!. These distribution arrangements typically are not
exclusive, and may be terminated upon little or no notice. Success of our online
properties in international markets may require us to establish relationships
with ISPs in various countries and regional markets, many of which have a
dominant market share in their territories. In addition, in the future we may be
required to establish relationships with providers of broad-based services. Even
if sufficient distribution opportunities are available to us in the U.S. or
abroad, third parties that provide distribution may assess fees or otherwise
impose additional conditions on the listing of Yahoo! or our other online
properties. Any failure to cost-effectively obtain distribution could have a
material adverse effect on our business, results of operations, and financial
condition.
We recently announced a co-branding and distribution arrangement with AT&T
(which superseded our previous agreement with MCI Internet) under which we will
provide a Web-based online service in conjunction with dial-up Internet access
provided by AT&T WorldNet Service. In this arrangement, we will depend on AT&T
for effective marketing and promotion efforts and the provision of competitive
Internet access service to customers. Any failure by AT&T in these respects
could materially impair the benefits we expect to receive from this arrangement,
and could negatively affect the Yahoo! brand. In addition, the acquisition of
Excite by @Home Networks (a company whose largest stockholder will be AT&T upon
consummation of AT&T's acquisition of TCI) could adversely affect our
relationship with AT&T.
TO BE SUCCESSFUL, WE MUST CONTINUE TO ENHANCE OUR PROPERTIES AND DEVELOP NEW
ONES.
To remain competitive, we must continue to enhance and improve the
functionality, features, and content of the Yahoo! main site, as well as our
other branded media properties. We may not be able to successfully maintain
competitive user response times or implement new features and functions, which
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will involve the development of increasingly complex technologies. Personalized
information services, such as our Web-based email services, message boards,
stock portfolios and Yahoo! Clubs community features, require significantly
greater expenses than our general services. We cannot guarantee that these
additional expenses will be offset by additional revenues from personalized
services.
Our future success also depends in part upon the timely processing of
website listings submitted by users and Web content providers, which have
increased substantially in recent periods. We have, from time to time,
experienced significant delays in the processing of submissions. Further delays
could have a material adverse effect on our goodwill among Web users and content
providers, and on our business.
A key element of our business strategy is the development and introduction
of new Yahoo!-branded online properties targeted for specific interest areas,
user groups with particular demographic characteristics, and geographic areas.
We may not be successful in developing, introducing, and marketing such products
or media properties and such properties may not achieve market acceptance,
enhance our brand name recognition, or increase user traffic. Furthermore,
enhancements of or improvements to Yahoo! or new media properties may contain
undetected errors that require significant design modifications, resulting in a
loss of customer confidence and user support and a decrease in the value of our
brand name. Our ability to successfully develop additional targeted media
properties depends on use of Yahoo! to promote such properties. If use of Yahoo!
does not continue to grow, our ability to establish other targeted properties
would be adversely affected. If we fail to effectively develop and introduce new
properties, or those properties fail to achieve market acceptance, our business,
results of operations, and financial condition could be adversely affected.
OUR EQUITY INVESTMENTS IN OTHER COMPANIES MAY NOT YIELD THE RETURNS WE
ANTICIPATED.
We have made equity investments in affiliated companies that are involved in
the commercialization of Yahoo!-branded online properties, such as versions of
Yahoo! localized for foreign markets. These affiliated companies typically are
in an early stage of development and may be expected to incur substantial
losses. Our investments in such companies may not result in any return. As a
result, we have recorded and expect to continue to record a share of the losses
in such affiliates attributable to our ownership. We also have made equity
investments in non-affiliated companies involved in the development of
technologies or services that are complementary or related to our business, such
as our recent investments in GeoCities, broadcast.com inc. (formerly known as
AudioNet), Impulse Buy Network, CDnow, Inc., and E-Loan Inc. We intend to
continue to make significant additional investments in such companies in the
future. Losses resulting from such investments could have a material adverse
effect on our operating results.
WE MUST MANAGE THE INTEGRATION OF RECENTLY-ACQUIRED COMPANIES SUCCESSFULLY IN
ORDER TO ACHIEVE OUR DESIRED RESULTS.
Our recent growth has placed a significant strain on our managerial,
operational, and financial resources. To manage our growth, we must continue to
implement and improve our operational and financial systems and to expand,
train, and manage our employee base. The process of managing advertising within
large, high traffic websites such as ours is an increasingly important and
complex task. We rely on both internal and licensed third-party advertising
inventory management and analysis systems. To the extent that any extended
failure of our advertising management system results in incorrect advertising
insertions, we may be exposed to "make good" obligations with our advertising
customers, which, by displacing advertising inventory, could defer advertising
revenues. Failure of our advertising management systems to effectively scale to
higher levels of use or to effectively track and provide accurate and timely
reports on advertising results also could negatively affect our relationships
with advertisers. Our systems, procedures, or controls may not be adequate to
support our operations. Our management may not be able to achieve the rapid
execution necessary to fully exploit our market
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opportunity. Any inability to effectively manage growth could have a material
adverse effect on our business, operating results, and financial condition.
As part of our business strategy, we have completed several acquisitions and
expect to enter into additional business combinations and acquisitions. We
recently signed an agreement to acquire GeoCities, which is expected to be
completed in the second quarter of 1999. The consummation of this acquisition is
subject to certain conditions. We expect to record a one-time accounting charge
in the second quarter of 1999 relating to expenses for this acquisition. See
"Risks Related to the GeoCities Merger" below. Acquisition transactions are
accompanied by a number of risks, including:
- the difficulty of assimilating the operations and personnel of the
acquired companies;
- the potential disruption of our ongoing business and distraction of
management;
- the difficulty of incorporating acquired technology or content and rights
into our products and media properties;
- the correct assessment of the relative percentages of in-process research
and development expense which can be immediately written off as compared
to the amount which must be amortized over the appropriate life of the
asset;
- the failure to successfully develop an acquired in-process technology
could result in the impairment of amounts currently capitalized as
intangible assets;
- unanticipated expenses related to technology integration;
- the maintenance of uniform standards, controls, procedures and policies;
- the impairment of relationships with employees and customers as a result
of any integration of new management personnel; and
- the potential unknown liabilities associated with acquired businesses.
We may not be successful in addressing these risks or any other problems
encountered in connection with such acquisitions.
WE ARE EXPANDING INTO INTERNATIONAL MARKETS IN WHICH WE HAVE LIMITED EXPERIENCE.
A key part of our strategy is to develop Yahoo!-branded online properties in
international markets. We have developed and operate, through joint ventures
with SOFTBANK and related entities, versions of Yahoo! localized for Japan,
Germany, France, the United Kingdom, and Korea. We operate localized or mirror
versions of Yahoo! through wholly-owned subsidiaries in Australia, Denmark,
Italy, Norway, Sweden, and Singapore. We also offer Yahoo! guides in Spanish and
Mandarin Chinese.
To date, we have only limited experience in developing localized versions of
our products and marketing and operating our products and services
internationally. We rely on the efforts and abilities of our foreign business
partners in such activities. We also believe that in light of substantial
anticipated competition, we will need to move quickly into international markets
in order to effectively obtain market share. We may not be able to do so. We
expect to continue to experience higher costs as a percentage of revenues in
connection with international online properties. International markets we have
selected may not develop at a rate that supports our level of investment. In
particular, international markets may be slower in adoption of the Internet as
an advertising and commerce medium. We may experience difficulty in managing
international operations as a result of distance as well as language and
cultural differences. We or our partners may not be able to successfully market
and operate our products and services in foreign markets. In addition, in a
number of international markets we face substantial competition from ISPs, some
of which have a dominant market share in their territories, that offer or may
offer their own navigational service.
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In addition to uncertainty about our ability to continue to generate
revenues from our foreign operations and expand our international presence,
there are certain risks inherent in doing business on an international level,
including:
- unexpected changes in regulatory requirements;
- trade barriers;
- difficulties in staffing and managing foreign operations;
- longer payment cycles;
- currency exchange rate fluctuations;
- problems in collecting accounts receivable;
- political instability;
- export restrictions;
- export controls relating to encryption technology;
- seasonal reductions in business activity in certain other parts of the
world; and
- potentially adverse tax consequences.
One or more of these factors could have a material adverse effect on our future
international operations and, consequently, on our business, operating results,
and financial condition.
RISKS RELATED TO THE GEOCITIES MERGER
THE MARKET PRICE OF OUR COMMON STOCK COULD DECLINE AS A RESULT OF THE MERGER.
The market price of our common stock could decline as a result of the merger
if:
- the integration of Yahoo! and GeoCities is unsuccessful;
- the combined company does not achieve the perceived benefits of the merger
as rapidly or to the extent anticipated by financial analysts; or
- the effect of the merger on the combined company financial results is not
consistent with the expectations of financial analysts.
THE MERGER IS INTENDED TO QUALIFY AS A POOLING OF INTERESTS AND FINANCIAL
RESULTS WOULD BE NEGATIVELY AFFECTED BY THE FAILURE TO SO QUALIFY.
We intend to account for the merger under the pooling of interest accounting
and financial reporting rules. To qualify the merger as a pooling of interests
for accounting purposes, Yahoo! and GeoCities and their respective affiliates
must meet the criteria for pooling of interests accounting established in
opinions published by the Accounting Principles Board and interpreted by the
Financial Accounting Standards Board and the Commission. These opinions are
complex and the interpretation of them is subject to change. Consummation of the
merger is conditioned, among other things, upon our receipt of a customary
"pooling letter" from our independent accountants and GeoCities' independent
accountants.
However, the availability of pooling of interests accounting treatment for
the merger depends in part, upon circumstances and events occurring after the
effective date of the merger. For example, there must be no significant changes
in the business of the combined company, including significant dispositions of
assets, for a period of two years following the effective time. Further,
affiliates of Yahoo! and GeoCities must not sell, or otherwise reduce their risk
with respect to, any shares of either Yahoo! and GeoCities capital stock, except
for a small number as defined by certain Commission rules
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and regulations, during the period beginning 30 days before the effective date
and continuing until the day that Yahoo! publicly announces financial results
covering at least 30 days of combined operations of Yahoo! and GeoCities after
the merger. If the merger is completed and the effective date occurs during May
1999, we expect that such combined financial results would be published in July
1999. If affiliates of Yahoo! or GeoCities sell their shares of Yahoo! common
stock prior to that time despite a contractual obligation not to do so, the
merger may not qualify for accounting as a pooling of interests for financial
reporting purposes. The failure of the merger to qualify for pooling of
interests accounting treatment for financial reporting purposes for any reason
would materially and adversely affect our reported earnings and likely, the
price of our common stock.
THE MERGER MAY NOT RECEIVE REGULATORY OR SHAREHOLDER APPROVAL.
The consummation of the merger is subject to a number of conditions
including approval by the stockholders of GeoCities and certain regulatory
approvals. We cannot provide any assurance that all conditions upon which the
merger is contingent will be met. If the merger is not consummated for any
reason, the trading price of our stock could be materially adversely affected.
In addition, if the merger is not consummated, then the attention and effort
devoted to the integration of the two companies will have significantly diverted
management's attention from other important issues, and could have a material
adverse impact on us in the future.
INDUSTRY RISKS
WE ARE SUBJECT TO CAPACITY CONSTRAINTS AND SYSTEMS FAILURES.
We are dependent on our ability to effectively serve a high volume of use of
our online media properties. Accordingly, the performance of our online media
properties is critical to our reputation, our ability to attract advertisers to
our websites, and to achieve market acceptance of our products and media
properties. Any system failure that causes an interruption or an increase in
response time of our products and media properties could result in less traffic
to our websites and, if sustained or repeated, could reduce the attractiveness
of our products and media properties to advertisers and licensees. An increase
in the volume of queries conducted through our products and media properties
could strain the capacity of the software or hardware we have deployed, which
could lead to slower response time or system failures. In addition, as the
number of Web pages and users increase, our products and media properties and
infrastructure may not be able to scale accordingly. Personalized information
services, such as Web-based email and calendaring services, involve increasingly
complex technical and operational challenges that may strain our development and
operational resources. We may not be able to successfully implement and scale
such services to the extent required by any growth in the number of users of
such services. Failure to do so may affect the goodwill of users of these
services, or negatively affect our brand and reputation.
Our operations are susceptible to outages due to fire, floods, power loss,
telecommunications failures, break-ins, and similar events. In addition,
substantially all of our network infrastructure is located in Northern
California, an area susceptible to earthquakes. We do not have multiple site
capacity in the event of any such occurrence. Despite our implementation of
network security measures, our servers are vulnerable to computer viruses,
break-ins, and similar disruptions from unauthorized tampering with our computer
systems. We do not carry sufficient business interruption insurance to
compensate us for losses that may occur as a result of any of these events. Such
events could have a material adverse effect on our business, operating results,
and financial condition.
OUR INTELLECTUAL PROPERTY RIGHTS ARE COSTLY TO PROTECT.
We regard our copyrights, trademarks, trade dress, trade secrets, and
similar intellectual property as critical to our success. We rely upon trademark
and copyright law, trade secret protection and confidentiality or license
agreements with our employees, customers, partners and others to protect our
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proprietary rights. We have obtained the registration for certain of our
trademarks, including "Yahoo!" and "Yahooligans!". Effective trademark,
copyright, and trade secret protection may not be available in every country in
which our products and media properties are distributed or made available
through the Internet. We have licensed in the past, and may license in the
future, elements of our distinctive trademarks, trade dress, and similar
proprietary rights to third parties. While we attempt to ensure that the quality
of our brand is maintained by our licensees, our licensees may take actions that
could materially and adversely affect the value of our proprietary rights or the
reputation of our products and media properties. We are aware that third parties
have, from time to time, copied significant portions of Yahoo! directory
listings for use in competitive Internet navigational tools and services. The
distinctive elements of Yahoo! may not be protectible under copyright law. We
cannot guarantee that the steps we have taken to protect our proprietary rights
will be adequate.
Many parties are actively developing search, indexing, e-commerce and other
Web-related technologies. We believe that these parties will continue to take
steps to protect these technologies, including seeking patent protection. As a
result, we believe that disputes regarding the ownership of these technologies
are likely to arise in the future. For example, we are aware that a number of
patents have been issued in the areas of electronic commerce, online auctions,
Web-based information indexing and retrieval (including patents recently issued
to one of our direct competitors), online direct marketing, fantasy sports,
common Web graphics formats and mapping technologies. We anticipate that
additional third-party patents will be issued in the future. From time to time
parties assert patent infringement claims against us in the form of letters,
lawsuits and other forms of communications. In addition to patent claims, third
parties may assert claims against us alleging infringement of copyrights,
trademark rights, trade secret rights or other proprietary rights or alleging
unfair competition. In the event that we determine that licensing patents or
other proprietary rights is appropriate, we cannot guarantee that we would be
able to license such proprietary rights on reasonable terms or at all. We may
incur substantial expenses in defending against third party infringement claims
regardless of the merit of such claims. In the event that there is a
determination that we have infringed third-party proprietary rights, we could
incur substantial monetary liability and be prevented from using the rights in
the future. In addition, we are aware of lawsuits filed against two of our
competitors regarding the presentment of advertisements in response to search
requests on "keywords" that may be trademarks of third parties. It is not clear
what, if any, impact an adverse ruling in these recently filed lawsuits would
have on us.
WE DEPEND ON KEY PERSONNEL, WHO MAY NOT CONTINUE TO WORK FOR US.
We are substantially dependent on the continued services of our key
personnel, including our chief executive officer, chief financial officer, chief
operating officer, chief technical officer, our vice presidents in charge of
business development, sales and production and our senior engineers. Each of
these individuals has acquired specialized knowledge and skills with respect to
Yahoo! and its operations. As a result, if any of these individuals were to
leave Yahoo!, we could face substantial difficulty in hiring qualified
successors and could experience a loss in productivity while any such successor
obtains the necessary training and experience. We expect that we will need to
hire additional personnel in all areas. The competition for qualified personnel
in our industry is intense, particularly in the San Francisco Bay Area, where
our corporate headquarters are located. At times, we have experienced
difficulties in hiring personnel with the right training or experience,
particularly in technical areas. We do not maintain key person life insurance
for any of our personnel. If we do not succeed in attracting new personnel, or
retaining and motivating existing personnel, our business will be adversely
affected.
WE ARE SUBJECT TO GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES.
There are currently few laws or regulations directly applicable to the
Internet. Due to the increasing popularity and use of the Internet, it is
possible that laws and regulations may be adopted, covering issues such as user
privacy, defamation, pricing, taxation, content regulation, quality of products
and services, and intellectual property ownership and infringement. Such
legislation could expose us to
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substantial liability. Such legislation could also dampen the growth in use of
the Web, decrease the acceptance of the Web as a communications and commercial
medium, or require us to incur significant expense in complying with any new
regulations. Other nations, including Germany, have taken actions to restrict
the free flow of material deemed to be objectionable on the Web. The European
Union has recently adopted privacy and copyright directives that may impose
additional burdens and costs on our international operations. In addition,
several telecommunications carriers, including America's Carriers'
Telecommunications Association, are seeking to have telecommunications over the
Web regulated by the FCC in the same manner as other telecommunications
services. Because the growing popularity and use of the Web has burdened the
existing telecommunications infrastructure and many areas with high Web use have
begun to experience interruptions in phone service, local telephone carriers,
such as Pacific Bell, have petitioned the FCC to regulate ISPs and OSPs and to
impose access fees. Increased regulation or the imposition of access fees could
substantially increase the costs of communicating on the Web, potentially
decreasing the demand for our products and media properties. A number of
proposals have been made at the federal, state and local level that would impose
additional taxes on the sale of goods and services through the Internet. Such
proposals, if adopted, could substantially impair the growth of electronic
commerce, and could adversely affect the Company's opportunity to derive
financial benefit from such activities.
Two recently passed federal laws could have an impact on our business. The
Digital Millenium Copyright Act is intended to reduce the liability of online
service providers for listing or linking to third-party websites that include
materials that infringe copyrights or other rights of others. The Children's
Online Protection Act and the Children's Online Privacy Act are intended to
restrict the distribution of certain materials deemed harmful to children and
impose additional restrictions on the ability of online services to collect user
information from minors. We are currently reviewing this legislation, and cannot
currently predict the effect, if any, that it will have on our business. They
may impose significant additional costs on our business or subject us to
additional liabilities.
In addition, a number of other countries have announced or are considering
additional regulation. For example, the European Commission is expected in the
near future to propose a directive concerning the liability of online service
providers for activities that take place using their services. Such laws and
regulations could fundamentally impair our ability to provide Internet
navigation or other services, or substantially increase the cost of doing so.
Moreover, the applicability to the Internet of existing laws governing issues
such as property ownership, copyright, defamation, obscenity, and personal
privacy is uncertain. We may be subject to claims that our services violate such
laws. Any such new legislation or regulation in the United States or abroad or
the application of existing laws and regulations to the Internet could have a
material adverse effect on our business, operating results, and financial
condition.
Due to the global nature of the Web, it is possible that the governments of
other states and foreign countries might attempt to regulate our transmissions
or prosecute us for violations of their laws. We might unintentionally violate
such laws. Such laws may be modified, or new laws enacted, in the future. Any
such developments could have a material adverse effect on our business, results
of operations, and financial condition.
WE MAY BE SUBJECT TO LEGAL LIABILITY FOR OUR ONLINE SERVICES.
We host a wide variety of services that enable individuals to exchange
information, conduct business and engage in various online activities. The law
relating to the liability of providers of these online services for activities
of their users is currently unsettled. Claims could be made against us for
defamation, negligence, copyright or trademark infringement, personal injury or
other theories based on the nature and content of information that may be posted
online by our users. These types of claims have been brought, and sometimes
successfully pressed, against online service providers in the past. In addition,
we could be exposed to liability with respect to the selection of listings that
may be accessible through our Yahoo!-branded products and media properties, or
through content and materials that may
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be posted by users in classifieds, message board, clubs, chat room, or other
interactive community-building services. These claims might include, for
example, that by providing hypertext links to websites operated by third
parties, we are liable for copyright or trademark infringement or other wrongful
actions by those third parties through their websites, or that we are
responsible for legal injury caused by statements made to, or actions taken by,
participants in our message board services, Yahoo! Clubs, or other community
building services. It is also possible that if any information provided through
our services, such as stock quotes, analyst estimates or other trading
information, contains errors, third parties could make claims against us for
losses incurred in reliance on that information. We offer Web-based email
services, which expose us to potential risks, such as liabilities or claims
resulting from unsolicited email ("spamming"), lost or misdirected messages,
illegal or fraudulent use of email, or interruptions or delays in email service.
Investigating and defending these types of claims is expensive, even to the
extent the claims do not result in liability.
We also periodically enter into arrangements to offer third-party products
and services under the Yahoo! brand or via distribution on Yahoo! properties.
For example, we recently announced an arrangement with broadcast.com, an
Internet-based broadcast network, whereby links to broadcast.com's site and
content will be distributed via Yahoo! properties. These business arrangements
involve additional legal risks, such as potential liabilities for content posted
by free home page users or made available by other third-party providers. We may
be subject to claims concerning such services or content by virtue of our
involvement in marketing, branding or providing access to these services, even
if we do not ourselves host, operate, or provide these services. While our
agreements with these parties often provide that we will be indemnified against
such liabilities, such indemnification may not be adequate.
In October 1998, we acquired Yoyodyne Entertainment, Inc., a direct
marketing firm. Yoyodyne's business involves substantial use of sweepstakes,
contests and similar promotional events in order to solicit user registration
and involvement in direct marketing relationships. Sweepstakes and contests are
subject to extensive government regulation throughout the world, including
different regulatory schemes under states and territories in the United States,
and may be subject to laws governing lotteries and gambling. Although we intend
to operate these events to fall within exemptions from such laws, exemptions may
not be available. In addition, we anticipate that in the near future substantial
additional federal, state and international regulations may be adopted relating
to user privacy and the collection and utilization of user information. To the
extent that we do not effectively comply with these regulations, or if these
regulations materially impair our ability to effectively utilize direct
marketing, our business, results of operations, and financial condition could be
materially and adversely affected.
OUR E-COMMERCE ACTIVITIES MAY EXPOSE US TO UNCERTAIN LEGAL RISKS AND POTENTIAL
LIABILITIES.
As part of our business, we enter into agreements with sponsors, content
providers, service providers, and merchants under which we are entitled to
receive a share of revenue from the purchase of goods and services by users of
our online properties. These types of arrangements may expose us to additional
legal risks and uncertainties, including potential liabilities to consumers of
such products and services. Although we carry general liability insurance, our
insurance may not cover potential claims of this type or may not be adequate to
indemnify the Company for all liability that may be imposed.
We recently began offering a Yahoo!-branded VISA credit card, which includes
a "rewards" program entitling card users to receive points that may be redeemed
for merchandise, such as books or music. This arrangement exposes us to risks
and expenses relating to compliance with consumer protection laws, loss of
customer data, disputes over redemption procedures and rules, products
liability, sales taxation and liabilities associated with any failure in
performance by participating merchants.
In June 1998, we completed the acquisition of Viaweb Inc., a provider of
software and reporting tools for the operation of online commerce websites. We
intend to use the Viaweb technology to host and promote online stores on behalf
of third-party merchants, the operation and maintenance of which
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will be largely under the independent control of such merchants. These
activities expose us to a number of additional risks and uncertainties,
including:
- potential liabilities for illegal activities that may be conducted by
participating merchants;
- products liability or other tort claims relating to goods or services sold
through hosted commerce sites;
- consumer fraud and false or deceptive advertising or sales practices;
- breach of contract claims relating to merchant transactions;
- claims that materials included in merchant sites or sold by merchants
through these sites infringe third-party patents, copyrights, trademarks
or other intellectual property rights, or are libelous, defamatory or in
breach of third-party confidentiality or privacy rights;
- claims relating to any failure of merchants to appropriately collect and
remit sales or other taxes arising from e-commerce transactions; and
- claims that may be brought by merchants as a result of their exclusion
from our commerce services or losses resulting from any downtime or other
performance failures in our hosting services.
Although we maintain liability insurance, insurance may not cover these
claims or may not be adequate. Even to the extent these types of claims do not
result in material liability, investigating and defending the claims is
expensive.
We intend to significantly expand our online stores in the future, along
with the services we offer to online store merchants. If we are unsuccessful in
this expansion, our overall business will be adversely affected.
In September 1998, we launched Yahoo! Auctions, a free service that hosts
online auctions for a wide variety of goods and services. Auction services
expose the Company to a number of significant additional risks. For example,
while we do not pre-screen the types of goods offered on Yahoo! Auctions, we are
aware that certain goods, such as alcohol, tobacco, firearms, adult material and
other goods that may be subject to regulation by local, state or federal
authorities may be traded on Yahoo! Auctions. We might not be able to prevent
the unlawful exchange of goods on our service, and may be subject to civil or
criminal liability for unlawful activities carried out by users through our
service. In addition, while we take no responsibility for delivery of payment or
goods to any user of Yahoo! Auctions, we anticipate that users who did not
receive the purchase price or the goods that were to have been exchanged may
register complaints with us or seek to hold us liable. We also anticipate that
we will receive complaints from buyers as to the quality of the goods purchased
through Yahoo! Auctions, as well as complaints alleging that comments posted by
participants of the service concerning other participants are unfair or
defamatory. Any claims or litigation arising from Yahoo! Auctions could be
costly. Any negative publicity generated as a result of fraudulent or deceptive
conduct by users of Yahoo! Auctions could damage our reputation and diminish the
value of our brand name. We have also received in the past, and anticipate that
we will receive in the future, communications claiming that certain items sold
through Yahoo! Auctions, or text and images posted by users in auction listings,
infringe third-party copyrights, trademarks or other intellectual property
rights. While our user policies prohibit the sale of goods and posting of
materials which may infringe third-party intellectual property rights, an
allegation of infringement may result in costly litigation.
WE FACE YEAR 2000 RISKS
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field and cannot distinguish 21st
century dates from 20th century dates. These date code fields will need to
distinguish 21st century dates from 20th century dates and, as a
19
<PAGE>
result, many companies' software and computer systems may need to be upgraded or
replaced in order to comply with such "Year 2000" requirements.
YEAR 2000 ASSESSMENT. We are currently assessing the Year 2000 issue and
expect to complete the program by the spring of 1999. We have not incurred
material costs to date in this process, and currently do not believe that the
cost of additional actions will have a material effect on our results of
operations or financial condition. Although we currently believe that our
systems are Year 2000 compliant in all material respects, our current systems
and products may contain undetected errors or defects with Year 2000 date
functions that may result in material costs. Although we are not aware of any
material operational issues or costs associated with preparing our internal
systems for the Year 2000, we may experience serious unanticipated negative
consequences or material costs caused by undetected errors or defects in the
technology used in our internal systems.
THIRD PARTY EQUIPMENT AND SOFTWARE. In addition, we utilize third-party
equipment, software and content, including non-information technology systems
("non-IT systems"), such as our security system, building equipment and non-IT
systems embedded microcontrollers that may not be Year 2000 compliant. We are in
the process of developing a plan to assess whether these third parties are
adequately addressing the Year 2000 issue and whether any of our non-IT systems
have material Year 2000 compliance problems. Failure of such third-party
equipment, software or content to operate properly with regard to the year 2000
and thereafter could require us to incur unanticipated expenses to remedy any
problems. We are also subject to external forces that might generally affect
industry and commerce, such as utility or transportation company Year 2000
compliance failures and related service interruptions. Furthermore, the
purchasing patterns of advertisers may be affected by Year 2000 issues as
companies expend significant resources to correct their current systems for Year
2000 compliance. We do not currently have any information about the Year 2000
status of our advertising customers. However, these expenditures may result in
reduced funds available for Web advertising or sponsorship of Web services.
CONSEQUENCES OF YEAR 2000 MALFUNCTIONS. Despite efforts to address the Year
2000 risks, our business operations could be adversely affected by Year 2000
problems. Any such Year 2000 problems could result in:
- significant downtime for one or more Yahoo! media properties, which could
result in a loss of users and sponsorship;
- deferral of revenue recognition on contracts in which we have warranted
(or may in the future warrant) compliance with Year 2000 requirements;
- an increase in the allocation of resources to address Year 2000 issues,
which could result in decreased productivity in our core operations; or
- an increase in litigation costs relating to losses suffered by others as a
result of any Year 2000 malfunctions that affect our service.
The occurrence of one or more of the foregoing could have a material adverse
effect on our business, results of operations, and financial condition. We are
in the process of developing a comprehensive contingency plan to address
situations that may result if we are unable to achieve Year 2000 readiness of
our critical operations. However, such contingency plan may not adequately
address the Year 2000 risks.
20
<PAGE>
INVESTMENT RISKS
OUR STOCK PRICE HAS HISTORICALLY BEEN VOLATILE, WHICH MAY MAKE IT MORE DIFFICULT
FOR YOU TO RESELL SHARES WHEN YOU WANT AT PRICES YOU FIND ATTRACTIVE.
The trading price of our stock has been and may continue to be subject to
wide fluctuations. During 1998, the closing sale prices of our common stock on
the Nasdaq Stock Market ranged from $14.52 to $137.75. The stock price may
fluctuate in response to a number of events and factors, such as quarterly
variations in operating results, announcements of technological innovations or
new products and media properties by us or our competitors, changes in financial
estimates and recommendations by securities analysts, the operating and stock
price performance of other companies that investors may deem comparable, and
news reports relating to trends in our markets. In addition, the stock market in
general, and the market prices for Internet-related companies in particular,
have experienced extreme volatility that often has been unrelated to the
operating performance of such companies. These broad market and industry
fluctuations may adversely affect the price of the stock, regardless of our
operating performance.
MANAGEMENT AND ONE LARGE SHAREHOLDER OWN 57% OF OUR STOCK; THEIR INTERESTS COULD
CONFLICT WITH YOURS.
As of December 31, 1998, our directors and executive officers, and their
affiliates beneficially owned approximately 57% of our outstanding stock. As of
December 31, 1998, SOFTBANK owned approximately 30% of our outstanding stock. As
a result of their ownership, the directors, executive officers, and significant
shareholders (including SOFTBANK) collectively are able to control all matters
requiring shareholder approval, including the election of directors and approval
of significant corporate transactions. Such concentration of ownership may also
have the effect of delaying or preventing a change in control of Yahoo!.
ANTI-TAKEOVER PROVISIONS COULD MAKE IT MORE DIFFICULT FOR A THIRD PARTY TO
ACQUIRE US.
Our board of directors has the authority to issue up to 10,000,000 shares of
preferred stock and to determine the price, rights, preferences, privileges and
restrictions, including voting rights, of those shares without any further vote
or action by the shareholders. The rights of the holders of common stock may be
subject to, and may be adversely affected by, the rights of the holders of any
preferred stock that may be issued in the future. The issuance of preferred
stock may have the effect of delaying, deferring or preventing a change of
control of Yahoo! without further action by the shareholders and may adversely
affect the voting and other rights of the holders of common stock. We have no
present plans to issue shares of preferred stock. Further, certain provisions of
our charter documents, including provisions eliminating the ability of
shareholders to take action by written consent and limiting the ability of
shareholders to raise matters at a meeting of shareholders without giving
advance notice, may have the effect of delaying or preventing changes in control
or management of Yahoo!, which could have an adverse effect on the market price
of the stock. In addition, our charter documents do not permit cumulative voting
and provide that, at such time as we have at least six directors, the Yahoo!
board of directors will be divided into two classes, each of which serves for a
staggered two-year term, which may make it more difficult for a third-party to
gain control of the Board of Directors.
PRIVATELY-SOLD SHARES ELIGIBLE FOR PUBLIC RESALE COULD HAVE A NEGATIVE EFFECT ON
OUR STOCK PRICE.
As of March 1, 1999, we had outstanding 202,325,813 shares of our common
stock. As of December 31, 1998, there were outstanding options to purchase a
total of 52,848,532 shares of our common stock under our stock option plans,
including shares issued and options assumed in the recent acquisitions of
Viaweb, WebCal, Yoyodyne and HyperParallel. Of these shares, an estimated number
of 2,444,914 shares recently issued in connection with acquisitions and
investments have been available for resale pursuant to registration statements
previously filed by us with the SEC. 124,856 shares of our common stock will be
available for resale pursuant to this registration statement. Sales of
substantial amounts of such shares in the public market or the prospect of such
sales could adversely affect the market price of our common stock.
21
<PAGE>
USE OF PROCEEDS
The proceeds from the sale of the common stock offered pursuant to this
prospectus (the "Shares") are solely for the account of the selling
shareholders. Accordingly, we will not receive any proceeds from the sale of the
Shares from the selling shareholders.
ISSUANCE OF COMMON STOCK TO SELLING SHAREHOLDERS
On December 17, 1998, we issued an aggregate of 74,856 shares of common
stock to the shareholders of HyperParallel, Inc. pursuant to a merger agreement.
Under the terms of the merger agreement, HyperParallel became a wholly-owned
subsidiary of Hype Parent Corporation, a Delaware corporation and wholly-owned
subsidiary of Yahoo!.
On January 15, 1999, we issued an aggregate of 50,000 shares of common stock
to Log-Me-On.com, a Limited Liability Company, pursuant to an asset purchase
agreement. Under the terms of the asset purchase agreement, we purchased
substantially all of Log-Me-On's assets and assumed certain of its liabilities.
Promptly after the asset purchase, Log-Me-On.Com dissolved and distributed its
sole material asset, the 50,000 shares of Yahoo! common stock, to its members.
PLAN OF DISTRIBUTION
Shares of common stock covered hereby may be offered and sold from time to
time by the selling shareholders. The selling shareholders will act
independently of us in making decisions with respect to the timing, manner and
size of each sale. The selling shareholders may sell the Shares on the Nasdaq
National Market, or in private sales at negotiated prices directly or through a
broker. The selling shareholders and any underwriter, dealer or agent who
participate in the distribution of such shares may be deemed to be
"underwriters" under the Securities Act, and any discount, commission or
concession received by such persons might be deemed to be an underwriting
discount or commission under the Securities Act. We have agreed to indemnify the
selling shareholders against certain liabilities arising under the Securities
Act.
Any broker-dealer participating in such transactions as agent may receive
commissions from the selling shareholders (and, if acting as agent for the
purchaser of such shares, from such purchaser). Usual and customary brokerage
fees will be paid by the selling shareholders. Broker-dealers may agree with the
selling shareholders to sell a specified number of shares at a stipulated price
per share, and, to the extent such a broker-dealer is unable to do so acting as
agent for the selling shareholders, to purchase as principal any unsold shares
at the price required to fulfill the broker-dealer commitment to the selling
shareholders. Broker-dealers who acquire shares as principal may thereafter
resell such shares from time to time in transactions (which may involve crosses
and block transactions and which may involve sales to and through other
broker-dealers, including transactions of the nature described above) in the
over-the-counter market, in negotiated transactions or by a combination of such
methods of sale or otherwise at market prices prevailing at the time of sale or
at negotiated prices, and in connection with such resales may pay to or receive
from the purchasers of such shares commissions computed as described above.
We have advised the selling shareholders that the anti-manipulation rules
under the Exchange Act may apply to sales of Shares in the market and to the
activities of the selling shareholders and their affiliates. The selling
shareholders have advised us that during such time as the selling shareholders
may be engaged in the attempt to sell shares registered hereunder, they will:
- not engage in any stabilization activity in connection with any of our
securities;
- not bid for or purchase any of our securities or any rights to acquire our
securities, or attempt to induce any person to purchase any of our
securities or rights to acquire our securities other than as permitted
under the Exchange Act;
22
<PAGE>
- not effect any sale or distribution of the Shares until after the
prospectus shall have been appropriately amended or supplemented, if
required, to set forth the terms thereof; and
- effect all sales of Shares in broker's transactions through broker-dealers
acting as agents, in transactions directly with market makers, or in
privately negotiated transaction where no broker or other third party
(other than the purchaser) is involved.
The selling shareholders may indemnify any broker-dealer that participates
in transactions involving the sale of the shares against certain liabilities,
including liabilities arising under the Securities Act. Any commissions paid or
any discounts or concessions allowed to any such broker-dealers, and any profits
received on the resale of such shares, may be deemed to be underwriting
discounts and commissions under the Securities Act if any such broker-dealers
purchase shares as principal.
In order to comply with the securities laws of certain states, if
applicable, our common stock will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states, the
common stock may not be sold unless such shares have been registered or
qualified for sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied with.
We have agreed to use our best efforts to maintain the effectiveness of this
registration statement with respect to the shares of common stock offered
hereunder by the selling shareholders until the earlier of the sale of such
shares or January 15, 2000. No sales may be made pursuant to this prospectus
after such date unless we amend or supplement this prospectus to indicate that
we have agreed to extend such period of effectiveness. The selling shareholders
may sell all, some or none of the shares of common stock offered hereunder.
23
<PAGE>
SELLING SHAREHOLDERS
All of the common stock registered for sale pursuant to this prospectus will
be owned immediately after registration by the selling shareholders as the
former shareholders of HyperParallel, and Log-Me-On and all of the shares
offered by the selling shareholders were acquired in connection with the Merger
and the Asset Transfer respectively. Such shares do not exceed one percent (1%)
of our outstanding capitalization as of the date of this prospectus. None of the
selling shareholders has a material relationship with us, except that certain
selling shareholders are or will be non-officer employees of HyperParallel or
Yahoo!.
The following table sets forth certain information known to us with respect
to beneficial ownership of the Company's common stock as of January 22, 1999 by
each selling shareholder. The following table assumes that the selling
shareholders sell all of the Shares. We are unable to determine the exact number
of Shares that actually will be sold.
The number and percentage of shares beneficially owned is based on
202,325,813 shares outstanding at March 1, 1999 determined in accordance with
Rule 13d-3 of the Exchange Act, and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under such rule,
beneficial ownership includes any shares as to which the individual has sole or
shared voting power or investment power and also any shares which the individual
has the right to acquire within 60 days of January 22, 1999 through the exercise
of any stock option or other right. Unless otherwise indicated in the footnotes,
each person has sole voting and investment power (or shares such powers with his
or her spouse) with respect to the shares shown as beneficially owned.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
PRIOR TO THE OFFERING SHARES OFFERED AFTER THE OFFERING
-------------------------- BY THIS ----------------------------
SELLING SHAREHOLDERS SHARES PERCENT PROSPECTUS SHARES PERCENT
- ------------------------------------------------------- --------- --------------- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Andrew Fyfe............................................ 842 * 842 0 *
Robert G. Sievert...................................... 446 * 446 0 *
Jeff Jones............................................. 682 * 682 0 *
John Gins.............................................. 444 * 444 0 *
Kian-Tat Lim........................................... 868 * 868 0 *
Kenneth Reed........................................... 488 * 488 0 *
Lloyd Simpson, Jr...................................... 450 * 450 0 *
Penny Hill............................................. 394 * 394 0 *
Stephen Goldsmith...................................... 668 * 668 0 *
Susan Berry............................................ 510 * 510 0 *
Tim Gerk............................................... 394 * 394 0 *
William Nowacki........................................ 1,146 * 1,146 0 *
Ed Zyszkowski.......................................... 2,030 * 2,030 0 *
Tara Lemmey............................................ 104 * 104 0 *
Associated Venture Investors III, L.P.................. 2,588 * 2,588 0 *
AVI Capital, L.P....................................... 20,394 * 20,394 0 *
AVI Silicon Valley Partners, L.P....................... 188 * 188 0 *
Dunn Family Trust...................................... 2,356 * 2,356 0 *
Idanta Partners Ltd.................................... 22,910 * 22,910 0 *
Joanne C. Knight....................................... 16 * 16 0 *
Marshall A. Smith...................................... 16 * 16 0 *
Perscilla Faily Trust dated 6-27-96.................... 536 * 214 322 *
Pur Kayastha Family Trust A dated 9-20-91.............. 936 * 936 0 *
Pur Kayastha Family Trust B dated 9-20-91.............. 140 * 140 0 *
WPP Group (UK) Ltd..................................... 15,492 * 15,492 0 *
Jonathan Huberman...................................... 140 * 140 0 *
Tom Shafron............................................ 16,666 * 16,666 0 *
David Shafron.......................................... 11,668 * 11,668 0 *
Richard Riley.......................................... 16,666 * 16,666 0 *
Christopher Staib...................................... 5,000 * 5,000 0 *
</TABLE>
- ------------------------
* represents less than 1%
24
<PAGE>
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon by Venture Law Group, A Professional Corporation, Menlo Park, California,
counsel to Yahoo!.
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference to the Annual Report on Form 10-K of Yahoo! Inc. for the year ended
December 31, 1998 and the audited historical financial statements of Viaweb Inc.
included in Yahoo! Inc.'s Form 8-K dated June 12, 1998 (as amended on June 18,
1998 and January 21, 1999) have been so incorporated in reliance on the reports
of PricewaterhouseCoopers LLP, independent accounts, given on the authority of
said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement on Form S-3 that we
filed with the Securities and Exchange Commission. Certain information in the
registration statement has been omitted from this prospectus in accordance with
the rules of the SEC. We file the annual, quarterly and special reports, proxy
statements and other information with the SEC. You can inspect and copy the
registration statement as well as reports, proxy statements and other
information we have filed with the SEC at the public reference room maintained
by the SEC at 450 Fifth Street, NW, Washington, D.C. 20549, and at the following
Regional Offices of the SEC: Seven World Trade Center, New York, New York 10048,
and Northwest Atrium Center, 500 West Madison Street, Chicago, Illinois 60661.
You can obtain copies from the public reference room of the SEC at 450 Fifth
Street, NW, Washington, D.C. 20549 upon payment of certain fees. You can call
the SEC at 1-800-732-0330 for further information about the public reference
room. We are also required to file electronic versions of these documents with
the SEC, which may be accessed through the SEC's World Wide Web site at
http://www.sec.gov. Our common stock is quoted on the Nasdaq National Market.
Reports, proxy and information statements and other information concerning
Yahoo! Inc. may be inspected at The Nasdaq Stock Market at 1735 K Street, NW,
Washington, D.C. 20006.
The SEC allows us to "incorporate by reference" certain of our
publicly-filed documents into this prospectus, which means that information
included in these documents is considered part of this prospectus. Information
that we file with the SEC subsequent to the date of this prospectus will
automatically update and supersede this information. We incorporate by reference
the documents listed below and any future filings made with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, until
the selling shareholders have sold all the shares.
The following documents filed with the SEC are incorporated by reference in
this prospectus:
1. Our Annual Report on Form 10-K for the year ended December 31, 1998
(File No. 0-26822).
2. Our definitive Proxy Statement dated March 12, 1998, filed in
connection with our April 17, 1998 Annual Meeting of Shareholders.
3. Our Current Reports on Form 8-K, filed with the SEC on June 12, 1998
(as amended on June 18, 1998 and January 21, 1999), January 13, 1999 and
January 29, 1999 (File No. 0-26822).
4. The description of our common stock in our registration statement on
Form 8-A, filed with the SEC on March 12, 1996 (File No. 0-026822).
We will furnish without charge to you, on written or oral request, a copy of
any or all of the documents incorporated by reference, other than the exhibits
to those documents. You should direct any requests for documents to Andrea
Klipfel, Investor Relations, 3420 Central Expressway, Santa Clara, California
95051, telephone: (408) 731-3300.
25
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Registrant will bear no expenses in connection with any sale or other
distribution by the selling shareholders of the shares being registered other
than the expenses of preparation and distribution of this Registration Statement
and the prospectus included in this Registration Statement. Such expenses are
set forth in the following table. All of the amounts shown are estimates except
the Securities and Exchange Commission ("SEC") registration fee and the NASD
listing fee.
<TABLE>
<S> <C>
SEC registration fee............................................... $ 5,845
Legal fees and expenses............................................ $ 15,000
Accounting fees and expenses....................................... $ 10,000
NASD listing fee................................................... $ 4,000
Miscellaneous expenses............................................. $ 5,155
---------
Total.......................................................... $ 40,000
---------
---------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 317 of the California Corporations Code allows for the
indemnification of officers, directors, and other corporate agents in terms
sufficiently broad to indemnify such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act of 1933, as amended (the "Securities Act"). Article VII of the
Registrant's Articles of Incorporation and Article VI of the Registrant's Bylaws
provide for indemnification of the Registrant's directors, officers, employees
and other agents to the extent and under the circumstances permitted by the
California Corporations Code. The Registrant has also entered into agreements
with its directors and officers that will require the Registrant, among other
things, to indemnify them against certain liabilities that may arise by reason
of their status or service as directors to the fullest extent not prohibited by
law.
In connection with this offering, the selling shareholders have agreed to
indemnify the Registrant, its directors and officers and each such person who
controls the Registrant, against any and all liability arising from inaccurate
information provided to the Registrant by the selling shareholders and contained
herein up to a maximum of the net proceeds received by the selling shareholders
from the sale of their Shares hereunder.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBITS.
- -----------
<C> <S>
5.1 Opinion of Venture Law Group, A Professional Corporation
23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants (see page II-4)
23.2 Consent of Venture Law Group, A Professional Corporation (included in Exhibit 5.1)
*24.1 Power of Attorney
</TABLE>
- ------------------------
* Previously Filed
II-1
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any material change
to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of this offering.
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Exchange Act that is incorporated by
reference in the Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Yahoo! Inc. certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
amendment to the registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Santa Clara, State of
California, on March 12, 1999.
<TABLE>
<S> <C> <C>
YAHOO! INC.
By: */s/ GARY VALENZUELA
------------------------------------------
Timothy Koogle
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
amendment to the registration statement has been signed by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
Chairman, Chief Executive
*/s/ GARY VALENZUELA Officer and Director
- ------------------------------ (Principal Executive March 12, 1999
Timothy Koogle Officer)
Senior Vice President,
Finance and
/s/ GARY VALENZUELA Administration, and
- ------------------------------ Chief Financial Officer March 12, 1999
Gary Valenzuela (Principal Financial
Officer)
*/s/ GARY VALENZUELA Vice President, Finance
- ------------------------------ (Chief Accounting March 12, 1999
James J. Nelson Officer)
*/s/ GARY VALENZUELA
- ------------------------------ Director March 12, 1999
Eric Hippeau
*/s/ GARY VALENZUELA
- ------------------------------ Director March 12, 1999
Arthur H. Kern
*/s/ GARY VALENZUELA
- ------------------------------ Director March 12, 1999
Michael Moritz
*/s/ GARY VALENZUELA
- ------------------------------ Director March 12, 1999
Jerry Yang
*/s/ GARY VALENZUELA
- ------------------------------ President, Chief Operating March 12, 1999
Jeff Mallett Officer and Director
By: */s/ GARY VALENZUELA
- ------------------------------ Attorney-in-Fact March 12, 1999
Gary Valenzuela
</TABLE>
II-3
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
January 8, 1999, except as to the stock split described in Note1 and Note 10,
which are as of February 8, 1999, appearing on page 39 of Yahoo! Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1998. We also consent to the
incorporation by reference of our report dated June 2, 1998, except as to Note
8, which is as of June 10, 1998, relating to the financial statements of Viaweb
Inc. (a development state enterprise), which appears in the Current Report on
Form 8-K of Yahoo! Inc. dated June 12, 1998 (as amended June 18, 1998 and
January 21, 1999). We also consent to the reference to us under the heading
"Experts" in such Prospectus.
/s/ PricewaterhouseCoopers LLP
San Jose, California
March 12, 1999
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- ----------------------------------------------------------------------------------------------
<C> <S>
5.1 Opinion of Venture Law Group, A Professional Corporation
23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants (see page II-4)
23.2 Consent of Venture Law Group, A Professional Corporation (included in Exhibit 5.1)
*24.1 Power of Attorney
</TABLE>
- ------------------------
* Previously Filed
<PAGE>
EXHIBIT 5.1
OPINION OF COUNSEL
March 12, 1999
Yahoo! Inc.
3420 Central Expressway
Santa Clara, CA 95051
REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 which was filed by
you with the Securities and Exchange Commission on February 2, 1999, and have
examined Amendment No. 1 thereto which will be filed on or about March 12, 1999
(as amended, the "Registration Statement") in connection with the registration
under the Securities Act of 1933 of shares of your common stock (the "Shares"),
to be sold by certain shareholders listed in the Registration Statement (the
"Selling Shareholders"). As your legal counsel in connection with this
transaction, we have examined the proceedings taken and are familiar with the
proceedings proposed to be taken by you in connection with the sale of the
Shares.
It is our opinion that the Shares, when sold by the selling shareholders in
the manner described in the Registration Statement, will be legally and validly
issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever it appears in the
Registration Statement and in any amendment to it.
Sincerely,
VENTURE LAW GROUP
A Professional Corporation
/s/ VENTURE LAW GROUP
