Err:502

Company Name: Yahoo! Inc. Effective Tax Rate: 40%

Ticker: YHOO
Last Historical Year: 12/31/2007 Blue indicates hard-coded numbers.
Valuation Date: 1/30/2008 Black indicates formulas.
Transaction Close Date: 6/30/2009 Green indicates links from other worksheets.

Operating Case: 1 Base

1 Base Labels for Comparables:
2 Conservative
3 Management Trailing Twelve Months TTM
Forward Year 1 12/31/2008
Days in Year: 365 Forward Year 2 12/31/2009
Unit for Employee Salaries: 1000000 Forward Year 3 12/31/2010

Lookup Cells for Public Company Comparables: Lookup Cells for Precedent Transactions:

Company Name 2 Acquirer Name 4

Share Price 42 Target Name 2
Equity Value 59 Acquisition Date 34
Enterprise Value 60 Offer Price 35
TTM Revenue 5 Equity Value 54
Forward Year 1 Revenue 72 Enterprise Value 55
Forward Year 2 Revenue 77 TTM Revenue 7
TTM EBITDA 23 TTM EBITDA 16
Forward Year 1 EBITDA 73 Forward Year 1 Revenue 65
Forward Year 2 EBITDA 78 Forward Year 1 EBITDA 66
TTM EPS 21 TTM Revenue Multiple 73
Forward Year 1 EPS 75 TTM EBITDA Multiple 74
Forward Year 2 EPS 80 Forward Year 1 Revenue Multiple 77
TTM Revenue Multiple 87 Forward Year 1 EBITDA Multiple 78
Forward Year 1 Revenue Multiple 92
Forward Year 2 Revenue Multiple 97
TTM EBITDA Multiple 88
Forward Year 1 EBITDA Multiple 93
Forward Year 2 EBITDA Multiple 98
TTM P/E Multiple 90
Forward Year 1 P/E Multiple 95
Forward Year 2 P/E Multiple 100
Levered Beta 61
Debt 28
Tax Rate 18
Total Net Revenue (Ex-TAC) ($MM) - Yahoo! Inc.
Historical Projected
FY 2005 FY 2006 FY 2007 FY 2008E FY 2009E FY 2010E FY 2011E FY 2012E
Search Advertising: $977 $1,181 $1,384 $1,597 $1,815 $2,126 $2,346
Display Advertising: $1,730 $2,052 $2,415 $2,791 $3,195 $3,624 $4,071
Affiliate Site Revenue: $728 $625 $656 $683 $703 $724 $746
Premium Fees: $798 $881 $934 $981 $1,020 $1,050 $1,071
Other Revenue: $326 $374 $412 $449 $485 $519 $550
Total Net Revenue (Ex-TAC): $3,696 $4,560 $5,113 $5,801 $6,500 $7,217 $8,043 $8,784
Net Revenue Growth %: N/A 23.4% 12.1% 13.5% 12.1% 11.0% 11.4% 9.2%

Search Advertising - Yahoo! Inc.

Historical Projected
FY 2006 FY 2007 FY 2008E FY 2009E FY 2010E FY 2011E FY 2012E
Total # Searches - Global (MM): 726,000 813,120 902,563 992,820 1,082,173 1,168,747
Search Market Share - Yahoo! Inc.: 12.5% 12.0% 11.5% 11.0% 11.0% 10.5%
Total # Search Queries - Yahoo! Inc. (MM): 90,750 97,574 103,795 109,210 119,039 122,718
Revenue Per Search (RPS) - Yahoo! Inc.: $0.013 $0.014 $0.015 $0.017 $0.018 $0.019
Total Search Revenue - Yahoo! Inc. ($MM): $977 $1,181 $1,384 $1,597 $1,815 $2,126 $2,346

Total # Global Searches (MM) - Growth:

Base 12.5% 12.0% 11.0% 10.0% 9.0% 8.0%
Conservative 12.5% 10.0% 9.0% 8.0% 7.0% 6.0%
Management 12.5% 14.0% 13.5% 13.0% 12.5% 12.0%
Selected Global Search Growth: Base 12.0% 11.0% 10.0% 9.0% 8.0%

Yahoo! Inc. - Global Search Market Share:

Base 12.5% 12.0% 11.5% 11.0% 11.0% 10.5%
Conservative 12.5% 11.0% 10.0% 10.0% 9.0% 9.0%
Management 12.5% 12.5% 13.0% 13.5% 14.0% 14.0%
Selected Global Search Market Share: Base 12.0% 11.5% 11.0% 11.0% 10.5%
Yahoo! Inc. - RPS Growth:
Base 10.0% 9.0% 8.5% 8.0% 7.5% 7.0%
Conservative 10.0% 7.0% 7.0% 6.0% 5.0% 4.0%
Management 10.0% 11.0% 11.0% 11.0% 10.5% 10.0%
Selected RPS Growth: Base 9.0% 8.5% 8.0% 7.5% 7.0%

Display Advertising - Yahoo! Inc.

Historical Projected
FY 2006 FY 2007 FY 2008E FY 2009E FY 2010E FY 2011E FY 2012E
Daily Avg. Pageviews (MM) - Yahoo! Inc.: 3,933 4,546 4,955 5,351 5,779 6,184 6,616
Total Pageviews (MM) - Yahoo! Inc.: 1,435,454 1,659,108 1,808,427 1,953,101 2,109,349 2,257,004 2,414,994
Revenue Per Pageview - Yahoo! Inc.: $0.0012 $0.0012 $0.0013 $0.0014 $0.0015 $0.0016 $0.0017
Total Display Revenue - Yahoo! Inc. ($MM): $1,730 $2,052 $2,415 $2,791 $3,195 $3,624 $4,071

Pageviews (MM) - Yahoo! Inc. - Growth:

Base 15.0% 11.0% 9.0% 8.0% 8.0% 7.0% 7.0%
Conservative 15.0% 11.0% 8.0% 7.0% 6.0% 5.0% 5.0%
Management 15.0% 11.0% 11.0% 10.0% 10.0% 9.0% 9.0%
Selected Pageviews Growth: Base 9.0% 8.0% 8.0% 7.0% 7.0%

Yahoo! Inc. - Revenue Per Pageview Growth:

Base 10.0% 7.0% 8.0% 7.0% 6.0% 6.0% 5.0%
Conservative 10.0% 7.0% 6.0% 6.0% 5.0% 5.0% 4.0%
Management 10.0% 7.0% 12.0% 11.0% 11.0% 10.0% 10.0%
Selected Revenue Per Pageview Growth: Base 8.0% 7.0% 6.0% 6.0% 5.0%

Subscription Fees - Yahoo! Inc.

Historical Projected
FY 2005 FY 2006 FY 2007 FY 2008E FY 2009E FY 2010E FY 2011E FY 2012E
Total Subscribers (MM): 12.60 16.30 19.00 20.14 21.15 21.99 22.65 23.11
Fees Per Subscriber: $52.67 $48.99 $46.37 $46.37 $46.37 $46.37 $46.37 $46.37
Fee Revenue ($MM): $664 $798 $881 $934 $981 $1,020 $1,050 $1,071
Subscribers (MM) - Yahoo! Inc. - Growth:
Base 29.4% 16.6% 6.0% 5.0% 4.0% 3.0% 2.0%
Conservative 29.4% 16.6% 5.0% 4.0% 3.0% 2.0% 2.0%
Management 29.4% 16.6% 8.0% 7.0% 6.0% 5.0% 4.0%
Selected Subscriber Growth: Base 6.0% 5.0% 4.0% 3.0% 2.0%

Yahoo! Inc. - Fees Per Subscriber Growth:

Base (7.0%) (5.3%) 0.0% 0.0% 0.0% 0.0% 0.0%
Conservative (7.0%) (5.3%) (2.0%) (2.0%) (1.0%) (1.0%) 0.0%
Management (7.0%) (5.3%) 2.0% 1.0% 0.0% 0.0% 0.0%
Selected Fees Per Subscriber Growth: Base 0.0% 0.0% 0.0% 0.0% 0.0%

Miscellaneous Revenue - Yahoo! Inc.

Historical Projected
FY 2006 FY 2007 FY 2008E FY 2009E FY 2010E FY 2011E FY 2012E
Affiliate Site Net Revenue ($MM): $728 $625 $656 $683 $703 $724 $746
Other Revenue ($MM): $326 $374 $412 $449 $485 $519 $550

Affiliate Site Net Revenue ($MM) - Yahoo! Inc. - Growth:

Base 5.0% 4.0% 3.0% 3.0% 3.0%
Conservative 4.0% 3.0% 2.0% 1.0% 0.0%
Management 7.0% 7.0% 6.0% 6.0% 5.0%
Selected Affiliate Site Net Revenue Growth: Base 5.0% 4.0% 3.0% 3.0% 3.0%

Other Revenue ($MM) - Yahoo! Inc. - Growth:

Base 10.0% 9.0% 8.0% 7.0% 6.0%
Conservative 8.0% 7.0% 6.0% 5.0% 4.0%
Management 12.0% 12.0% 11.0% 11.0% 10.0%
Selected Other Revenue Growth: Base 10.0% 9.0% 8.0% 7.0% 6.0%
Cost of Revenue & Operating Expenses ($MM) - Yahoo! Inc.
Historical Projected
FY 2005 FY 2006 FY 2007 FY 2008E FY 2009E FY 2010E FY 2011E FY 2012E
Cost of Revenue (Ex-TAC): $534 $810 $982 $1,122 $1,284 $1,457 $1,642 $1,814
Product Development: $570 $833 $1,084 $1,265 $1,443 $1,630 $1,830 $2,013
Sales & Marketing: $1,034 $1,322 $1,610 $1,785 $2,031 $2,289 $2,564 $2,813
General & Administrative: $341 $529 $633 $708 $809 $915 $1,029 $1,133
Total COGS and Operating Expenses: $2,479 $3,494 $4,310 $4,880 $5,566 $6,290 $7,065 $7,774
% Revenue (Ex-TAC): 67.1% 76.6% 84.3% 84.1% 85.6% 87.2% 87.8% 88.5%

Assumptions - Average Total Expenses Per Employee by Division - Yahoo! Inc.

Historical Projected
FY 2005 FY 2006 FY 2007 FY 2008E FY 2009E FY 2010E FY 2011E FY 2012E
Cost of Revenue (Ex-TAC): $215,500 $265,850 $250,000 $251,657 $257,108 $262,659 $265,707 $268,772
Product Development: $260,000 $310,000 $315,000 $323,942 $329,656 $335,421 $337,923 $340,391
Sales & Marketing: $360,000 $420,000 $428,000 $418,172 $424,564 $430,963 $433,118 $435,186
General & Administrative: $150,000 $210,000 $200,000 $197,089 $200,846 $204,651 $206,479 $208,299

Assumptions - # Employees by Division - Yahoo! Inc.

Historical Projected
FY 2005 FY 2006 FY 2007 FY 2008E FY 2009E FY 2010E FY 2011E FY 2012E
Cost of Revenue (Ex-TAC): 2,480 3,046 3,928 4,457 4,994 5,545 6,180 6,749
Product Development: 2,190 2,688 3,442 3,905 4,376 4,859 5,415 5,914
Sales & Marketing: 2,872 3,148 3,763 4,269 4,783 5,311 5,919 6,464
General & Administrative: 2,274 2,518 3,167 3,593 4,027 4,471 4,983 5,441
Total # Employees: 9,816 11,400 14,300 16,225 18,180 20,187 22,497 24,569
% Growth: N/A 16.1% 25.4% 13.5% 12.1% 11.0% 11.4% 9.2%

Cost of Revenue - Employee Expense Breakout - Yahoo! Inc.

Historical Projected
FY 2005 FY 2006 FY 2007 FY 2008E FY 2009E FY 2010E FY 2011E FY 2012E
Cost of Revenue Employees: 2,480 3,046 3,928 4,457 4,994 5,545 6,180 6,749
Total Expenses Per Employee: $215,500 $265,850 $250,000 $251,657 $257,108 $262,659 $265,707 $268,772
Cost of Revenue SBC ($MM): $0.000 $6.621 $10.628 $9.082 $10.482 $11.988 $13.627 $15.180
Stock-Based Compensation Per Employee: $0 $2,174 $2,706 $2,038 $2,099 $2,162 $2,205 $2,249
Expenses to be Allocated: $215,500 $263,676 $247,294

Salary % Compensation: 40.0% 40.0% 40.0%

Benefits % Compensation: 15.0% 15.0% 15.0%
Overhead % Compensation: 30.0% 30.0% 30.0%
Bonus % Compensation: 15.0% 15.0% 15.0%

Salary Per Employee: $86,200 $105,471 $98,918 $101,885 $104,942 $108,090 $110,252 $112,457
Benefits Per Employee: $32,325 $39,551 $37,094 $35,660 $36,730 $37,832 $38,588 $39,360
Overhead Per Employee: $64,650 $79,103 $74,188 $76,414 $77,657 $78,906 $79,381 $79,844
Bonus Per Employee: $32,325 $39,551 $37,094 $35,660 $35,680 $35,670 $35,281 $34,862
SBC Per Employee: $0 $2,174 $2,706 $2,038 $2,099 $2,162 $2,205 $2,249

Salary Per Employee % Growth: N/A 0.223556 -0.062129 3.0% 3.0% 3.0% 2.0% 2.0%
Benefits % Salary: 0.375 0.375 0.375 35.0% 35.0% 35.0% 35.0% 35.0%
Overhead % Salary: 0.75 0.75 0.75 75.0% 74.0% 73.0% 72.0% 71.0%
Bonus % Salary: 0.375 0.375 0.375 35.0% 34.0% 33.0% 32.0% 31.0%
SBC % Salary: 0 0.020609 0.027351 2.0% 2.0% 2.0% 2.0% 2.0%

Product Development - Employee Expense Breakout - Yahoo! Inc.

Historical Projected
FY 2005 FY 2006 FY 2007 FY 2008E FY 2009E FY 2010E FY 2011E FY 2012E
Product Development Employees: 2,190 2,688 3,442 3,905 4,376 4,859 5,415 5,914
Total Expenses Per Employee: $260,000 $310,000 $315,000 $323,942 $329,656 $335,421 $337,923 $340,391
Product Development SBC ($MM): $22.390 $144.807 $218.207 $253.017 $286.176 $320.618 $356.868 $389.062
Stock-Based Compensation Per Employee: $10,221 $53,880 $63,395 $64,788 $65,397 $65,985 $65,902 $65,790
Expenses to be Allocated: $249,779 $256,120 $251,605

Salary % Compensation: 50.0% 50.0% 50.0%

Benefits % Compensation: 15.0% 15.0% 15.0%
Overhead % Compensation: 25.0% 25.0% 25.0%
Bonus % Compensation: 10.0% 10.0% 10.0%

Salary Per Employee: $124,889 $128,060 $125,803 $129,577 $133,464 $137,468 $140,217 $143,022
Benefits Per Employee: $37,467 $38,418 $37,741 $38,873 $38,705 $38,491 $37,859 $37,186
Overhead Per Employee: $62,445 $64,030 $62,901 $64,788 $66,732 $68,734 $70,109 $71,511
Bonus Per Employee: $24,978 $25,612 $25,161 $25,915 $25,358 $24,744 $23,837 $22,883
SBC Per Employee: $10,221 $53,880 $63,395 $64,788 $65,397 $65,985 $65,902 $65,790

Salary Per Employee % Growth: N/A 0.025387 -0.017627 3.0% 3.0% 3.0% 2.0% 2.0%
Benefits % Salary: 0.3 0.3 0.3 30.0% 29.0% 28.0% 27.0% 26.0%
Overhead % Salary: 0.5 0.5 0.5 50.0% 50.0% 50.0% 50.0% 50.0%
Bonus % Salary: 0.2 0.2 0.2 20.0% 19.0% 18.0% 17.0% 16.0%
SBC % Salary: 0.0818442 0.420743 0.503924 50.0% 49.0% 48.0% 47.0% 46.0%

Sales & Marketing - Employee Expense Breakout - Yahoo! Inc.

Historical Projected
FY 2005 FY 2006 FY 2007 FY 2008E FY 2009E FY 2010E FY 2011E FY 2012E
Sales & Marketing Employees: 2,872 3,148 3,763 4,269 4,783 5,311 5,919 6,464
Total Expenses Per Employee: $360,000 $420,000 $428,000 $418,172 $424,564 $430,963 $433,118 $435,186
Sales & Marketing SBC ($MM): $8.698 $155.084 $246.472 $255.020 $286.970 $319.790 $353.953 $383.617
Stock-Based Compensation Per Employee: $3,028 $49,261 $65,507 $59,739 $59,993 $60,208 $59,796 $59,344
Expenses to be Allocated: $356,972 $370,739 $362,493

Salary % Compensation: 40.0% 40.0% 40.0%

Benefits % Compensation: 10.0% 10.0% 10.0%
Overhead % Compensation: 10.0% 10.0% 10.0%
Bonus % Compensation: 40.0% 40.0% 40.0%

Salary Per Employee: $142,789 $148,296 $144,997 $149,347 $153,827 $158,442 $161,611 $164,843
Benefits Per Employee: $35,697 $37,074 $36,249 $37,337 $36,919 $36,442 $35,554 $34,617
Overhead Per Employee: $35,697 $37,074 $36,249 $37,337 $36,919 $36,442 $35,554 $34,617
Bonus Per Employee: $142,789 $148,296 $144,997 $134,412 $136,906 $139,429 $140,602 $141,765
SBC Per Employee: $3,028 $49,261 $65,507 $59,739 $59,993 $60,208 $59,796 $59,344

Salary Per Employee % Growth: N/A 0.038569 -0.022244 3.0% 3.0% 3.0% 2.0% 2.0%
Benefits % Salary: 0.25 0.25 0.25 25.0% 24.0% 23.0% 22.0% 21.0%
Overhead % Salary: 0.25 0.25 0.25 25.0% 24.0% 23.0% 22.0% 21.0%
Bonus % Salary: 1 1 1 90.0% 89.0% 88.0% 87.0% 86.0%
SBC % Salary: 0.0212095 0.332178 0.451783 40.0% 39.0% 38.0% 37.0% 36.0%

General & Administrative - Employee Expense Breakout - Yahoo! Inc.

Historical Projected
FY 2005 FY 2006 FY 2007 FY 2008E FY 2009E FY 2010E FY 2011E FY 2012E
General & Administrative Employees: 2,274 2,518 3,167 3,593 4,027 4,471 4,983 5,441
Total Expenses Per Employee: $150,000 $210,000 $200,000 $197,089 $200,846 $204,651 $206,479 $208,299
General & Administrative SBC ($MM): $21.383 $118.418 $97.120 $112.815 $127.310 $142.295 $157.991 $171.798
Stock-Based Compensation Per Employee: $9,404 $47,027 $30,665 $31,395 $31,618 $31,826 $31,708 $31,572
Expenses to be Allocated: $140,596 $162,973 $169,335

Salary % Compensation: 40.0% 40.0% 40.0%

Benefits % Compensation: 15.0% 15.0% 15.0%
Overhead % Compensation: 40.0% 40.0% 40.0%
Bonus % Compensation: 5.0% 5.0% 5.0%

Salary Per Employee: $56,238 $65,189 $67,734 $69,766 $71,859 $74,015 $75,495 $77,005
Benefits Per Employee: $21,089 $24,446 $25,400 $24,418 $24,432 $24,425 $24,158 $23,872
Overhead Per Employee: $56,238 $65,189 $67,734 $62,790 $63,955 $65,133 $65,681 $66,224
Bonus Per Employee: $7,030 $8,149 $8,467 $8,721 $8,982 $9,252 $9,437 $9,626
SBC Per Employee: $9,404 $47,027 $30,665 $31,395 $31,618 $31,826 $31,708 $31,572

Salary Per Employee % Growth: N/A 0.159158 0.039039 3.0% 3.0% 3.0% 2.0% 2.0%
Benefits % Salary: 0.375 0.375 0.375 35.0% 34.0% 33.0% 32.0% 31.0%
Overhead % Salary: 1 1 1 90.0% 89.0% 88.0% 87.0% 86.0%
Bonus % Salary: 0.125 0.125 0.125 12.5% 12.5% 12.5% 12.5% 12.5%
SBC % Salary: 0.1672167 0.721392 0.452722 45.0% 44.0% 43.0% 42.0% 41.0%
Income Statement ($MM) - Yahoo! Inc.
Historical Projected
FY 2006 FY 2007 FY 2008E FY 2009E FY 2010E FY 2011E FY 2012E

Revenue (Ex-TAC): $4,560 $5,113 $5,801 $6,500 $7,217 $8,043 $8,784

Cost of Revenue (Ex-TAC): $810 $982 $1,122 $1,284 $1,457 $1,642 $1,814
Gross Profit: $3,750 $4,131 $4,679 $5,216 $5,761 $6,401 $6,970
Operating Expenses:
Product Development: $833 $1,084 $1,265 $1,443 $1,630 $1,830 $2,013
Sales & Marketing: $1,322 $1,610 $1,785 $2,031 $2,289 $2,564 $2,813
General & Administrative: $529 $633 $708 $809 $915 $1,029 $1,133
Amortization of Intangibles: $125 $107 $118 $66 $51 $29 $16
Total Operating Expenses: $2,809 $3,435 $3,876 $4,348 $4,884 $5,451 $5,976

Operating Income: $941 $695 $803 $867 $876 $950 $994

Interest / Investment Income: $143 $130 $87 $73 $76 $84 $98
Net Investment Gains / Losses & Other: $14 $24 $0 $0 $0 $0 $0
Pre-Tax Income: $1,098 $849 $890 $940 $952 $1,035 $1,093
Income Tax Provision: ($458) ($337) ($356) ($376) ($381) ($414) ($437)
Effective Income Tax Rate: 41.7% 39.7% 40.0% 40.0% 40.0% 40.0% 40.0%
Earnings in Equity Interests: $112 $151 $151 $151 $151 $151 $151
Minority Interest Earnings: ($1) ($3) ($3) ($3) ($3) ($3) ($3)
Net Income (GAAP): $751 $660 $682 $712 $719 $769 $803
Weighted Avg. Diluted Shares Outstanding: 1,458 1,405 1,405 1,405 1,405 1,405 1,405
Diluted EPS (GAAP): $0.52 $0.47 $0.48 $0.51 $0.51 $0.55 $0.57

Pro-Forma Reconciliation:
Amortization of Intangibles: $238 $250 $247 $139 $106 $60 $34
Stock-Based Compensation: $425 $572 $630 $711 $795 $882 $960
Pro-Forma Pre-Tax Income: $1,761 $1,672 $1,766 $1,790 $1,853 $1,977 $2,086
Effective Tax Rate: 41.7% 39.7% 40.0% 40.0% 40.0% 40.0% 40.0%
Equity & Minority Interest Earnings: $111 $148 $148 $148 $148 $148 $148
Pro-Forma Net Income: $1,138 $1,156 $1,208 $1,222 $1,260 $1,334 $1,400
Pro-Forma EPS: $0.78 $0.82 $0.86 $0.87 $0.90 $0.95 $1.00

Stock-Based Compensation: $425 $572 $630 $711 $795 $882 $960

Depreciation: $302 $409 $365 $477 $602 $742 $897
Amortization: $238 $250 $247 $139 $106 $60 $34
EBITDA: $1,906 $1,927 $2,045 $2,194 $2,380 $2,634 $2,885
EBIT: $1,366 $1,268 $1,433 $1,578 $1,671 $1,833 $1,954

Balance Sheet ($MM) - Yahoo! Inc.

Historical Projected
FY 2006 FY 2007 FY 2008E FY 2009E FY 2010E FY 2011E FY 2012E
Assets
Current Assets:
Cash and Cash Equivalents: $1,570 $1,514 $817 $839 $980 $1,246 $1,662
Short-Term Debt Investments: $1,032 $488 $488 $488 $488 $488 $488
Accounts Receivable, Net: $931 $1,056 $1,191 $1,334 $1,482 $1,651 $1,803
Prepaid Expenses & Other Current Assets: $218 $181 $241 $270 $300 $334 $365
Total Current Assets: $3,750 $3,238 $2,737 $2,932 $3,249 $3,719 $4,318
Long-Term Debt Investments: $936 $362 $362 $362 $362 $362 $362
Net PP&E: $1,101 $1,332 $1,663 $1,966 $2,229 $2,453 $2,610
Goodwill: $2,969 $4,002 $4,002 $4,002 $4,002 $4,002 $4,002
Net Intangible Assets: $406 $611 $364 $225 $119 $59 $25
Other Long-Term Assets: $460 $504 $504 $504 $504 $504 $504
Investments in Equity Interests: $1,892 $2,181 $2,181 $2,181 $2,181 $2,181 $2,181
Total Assets: $11,514 $12,230 $11,813 $12,172 $12,647 $13,280 $14,002

Liabilities & Shareholders' Equity

Current Liabilities:
Accounts Payable: $109 $176 $175 $196 $220 $246 $269
Accrued Expenses & Other Current Liabilities: $1,047 $1,006 $1,290 $1,447 $1,626 $1,814 $1,989
Short-Term Deferred Revenue: $318 $368 $411 $461 $512 $570 $623
 Short-Term Debt: $0 $750 $0 $0 $0 $0 $0
Total Current Liabilities: $1,474 $2,300 $1,876 $2,104 $2,357 $2,630 $2,881
Long-Term Deferred Revenue: $65 $95 $95 $107 $119 $132 $144
Long-Term Debt: $750 $0 $0 $0 $0 $0 $0
Other Long-Term Liabilities: $37 $28 $28 $28 $28 $28 $28
Deferred and Other Long-Term Tax Liabilities, Net: $19 $261 $261 $261 $261 $261 $261
Commitments and Contingincies: $0 $0 $0 $0 $0 $0 $0
Minority Interests: $8 $12 $12 $12 $12 $12 $12
Shareholders' Equity:
Common Stock: $1.493 $1.527 $1.527 $1.527 $1.527 $1.527 $1.527
Additional Paid-In Capital: $8,616 $9,937 $10,942 $12,028 $13,198 $14,455 $15,790
Treasury Stock: ($3,325) ($5,161) ($6,747) ($8,333) ($9,918) ($11,504) ($13,090)
Retained Earnings: $3,718 $4,424 $4,973 $5,552 $6,139 $6,775 $7,445
Accumulated Other Comprehensive Income: $151 $331 $371 $411 $450 $490 $530
Total Shareholders' Equity: $9,161 $9,533 $9,540 $9,659 $9,870 $10,217 $10,676
Total Liabilities & Shareholders' Equity: $11,514 $12,230 $11,813 $12,172 $12,647 $13,280 $14,002

BALANCE CHECK ($0) ($0) ($0) ($0) ($0) ($0) ($0)

Cash Flow Statement ($MM) - Yahoo! Inc.

Historical Projected
FY 2006 FY 2007 FY 2008E FY 2009E FY 2010E FY 2011E FY 2012E
Cash Flow from Operations:
Net Income: $751 $660 $682 $712 $719 $769 $803
Adjustments to Reconcile Net Income:
Depreciation: $302 $409 $365 $477 $602 $742 $897
Amortization of Intangibles: $238 $250 $247 $139 $106 $60 $34
Stock-Based Compensation: $425 $572 $630 $711 $795 $882 $960
Tax-Benefits from SBC: $626 $76 $0 $0 $0 $0 $0
Excess Tax Benefits from SBC: ($597) ($35) $0 $0 $0 $0 $0
Deferred Income Taxes: ($274) ($213) $0 $0 $0 $0 $0
Earnings in Equity Interests: ($112) ($151) ($151) ($151) ($151) ($151) ($151)
Dividends Received: $13 $15 $15 $15 $15 $15 $15
 Minority Interest Earnings: $1 $3 $3 $3 $3 $3 $3
Gains from Sale of Investments & Assets: ($15) ($28) $0 $0 $0 $0 $0
Changes in Operating Assets/Liabilities:
Accounts Receivable, Net: ($185) ($89) ($135) ($144) ($147) ($170) ($152)
Prepaid Expenses & Other Current Assets: ($10) $133 ($60) ($29) ($30) ($34) ($31)
Accounts Payable: $30 $45 ($1) $21 $24 $26 $24
Accrued Expenses & Other Liabilities: $175 $185 $284 $157 $178 $189 $175
Deferred Revenue: $4 $86 $43 $61 $63 $72 $65
Net Cash Provided by Operating Activities: $1,372 $1,919 $1,920 $1,973 $2,178 $2,402 $2,641

Cash Flow from Investing:

Capital Expenditures, Net: ($689) ($602) ($696) ($780) ($866) ($965) ($1,054)
Purchases of Debt Securities: ($1,329) ($1,105) $0 $0 $0 $0 $0
Proceeds from Sale & Maturities of Debt: $1,951 $2,244 $0 $0 $0 $0 $0
Acquisitions, Net of Cash Acquired ($142) ($974) $0 $0 $0 $0 $0
Proceeds from Sale of Equity Securities: $0 $0 $0 $0 $0 $0 $0
Purchases of Intangible Assets: ($6) ($110) $0 $0 $0 $0 $0
Other Investing Activities, Net: $21 ($25) $0 $0 $0 $0 $0
Net Cash Used in Investing Activities: ($194) ($573) ($696) ($780) ($866) ($965) ($1,054)

Cash Flow from Financing:

Proceeds from Issuance of Common Stock, Net: $318 $375 $375 $375 $375 $375 $375
Repurchases of Common Stock: ($1,782) ($1,586) ($1,586) ($1,586) ($1,586) ($1,586) ($1,586)
Structured Stock Repurchases, Net: ($228) ($250) $0 $0 $0 $0 $0
Excess Tax Benefits from SBC: $597 $35 $0 $0 $0 $0 $0
Repayment of Short-Term Debt: $0 $0 ($750) $0 $0 $0 $0
Other Financing Activities, Net: $0 ($17) $0 $0 $0 $0 $0
Net Cash Used in Financing Activities: ($1,095) ($1,442) ($1,960) ($1,211) ($1,211) ($1,211) ($1,211)
Effect of Exchange Rate Changes on Cash: $57 $40 $40 $40 $40 $40 $40
Net Change in Cash & Cash Equivalents: $140 ($56) ($696) $22 $141 $266 $416
Beginning Cash Balance: $1,430 $1,570 $1,514 $817 $839 $980 $1,246
Ending Cash Balance: $1,570 $1,514 $817 $839 $980 $1,246 $1,662
Operating Model Assumptions - Yahoo! Inc.
Historical Projected
FY 2006 FY 2007 FY 2008E FY 2009E FY 2010E FY 2011E FY 2012E

Accounts Receivable % Sales: 20.4% 20.6% 20.5% 20.5% 20.5% 20.5% 20.5%
Accounts Receivable Days: 74.5 75.4 74.9 74.9 74.9 74.9 74.9
Prepaid Expenses & Other Current Assets % Sales: 4.8% 3.5% 4.2% 4.2% 4.2% 4.2% 4.2%

Accounts Payable % OpEx: 3.9% 5.1% 4.5% 4.5% 4.5% 4.5% 4.5%
Accounts Payable Days: 14.2 18.7 16.4 16.4 16.4 16.4 16.4
Accrued Expenses & Other Current Liabilities % OpEx: 37.3% 29.3% 33.3% 33.3% 33.3% 33.3% 33.3%
Short-Term Deferred Revenue % Sales: 7.0% 7.2% 7.1% 7.1% 7.1% 7.1% 7.1%
Long-Term Deferred Revenue % Sales: 1.4% 1.9% 1.6% 1.6% 1.6% 1.6% 1.6%

Amortization of Net Intangible Assets: $238 $250 $247 $139 $106 $60 $34
% Amortization in OpEx: 52.5% 42.9% 47.7% 47.7% 47.7% 47.7% 47.7%

Short-Term Securities Interest Rate: 4.5% 4.3% 4.4% 4.4% 4.4% 4.4% 4.4%
Long-Term Securities Interest Rate: 5.0% 4.6% 4.8% 4.8% 4.8% 4.8% 4.8%
Effective Cash Interest Rate: 4.3% 3.9% 4.1% 4.1% 4.1% 4.1% 4.1%

PP&E Schedule - Yahoo! Inc.

Historical Projected
FY 2006 FY 2007 FY 2008E FY 2009E FY 2010E FY 2011E FY 2012E
Gross PP&E:
Land: $162 $163 $163 $163 $163 $163 $163
Buildings: $196 $253 $369 $499 $644 $804 $980
Leasehold Improvements: $150 $195 $282 $380 $488 $609 $741
Computers & Equipment: $1,208 $1,578 $2,042 $2,562 $3,139 $3,783 $4,485
Furniture & Fixtures: $93 $99 $128 $161 $197 $237 $281
Assets Not Yet In Use: $146 $120 $120 $120 $120 $120 $120
Total Gross PP&E: $1,955 $2,408 $3,104 $3,884 $4,750 $5,716 $6,770
Useful Lives, In Years:
Buildings: 25
Leasehold Improvements: 10
Computers & Equipment: 5
Furniture & Fixtures: 5

Depreciation Waterfall Schedule:

Original Balance: N/A N/A $365 $365 $365 $365 $365
Year 1 Additions: N/A N/A $0 $112 $112 $112 $112
Year 2 Additions: N/A N/A $0 $0 $125 $125 $125
Year 3 Additions: N/A N/A $0 $0 $0 $139 $139
Year 4 Additions: N/A N/A $0 $0 $0 $0 $155
Total Depreciation: $302 $409 $365 $477 $602 $742 $897

CapEx % Revenue by Segment:

Buildings: N/A 1.1% 2.0% 2.0% 2.0% 2.0% 2.0%
Leasehold Improvements: N/A 0.9% 1.5% 1.5% 1.5% 1.5% 1.5%
Computers & Equipment: N/A 7.2% 8.0% 8.0% 8.0% 8.0% 8.0%
Furniture & Fixtures: N/A 0.1% 0.5% 0.5% 0.5% 0.5% 0.5%
Total CapEx % Revenue: N/A 9.4% 12.0% 12.0% 12.0% 12.0% 12.0%

Capital Expenditures Schedule:

Buildings: N/A N/A $116 $130 $144 $161 $176
Leasehold Improvements: N/A N/A $87 $97 $108 $121 $132
Computers & Equipment: N/A N/A $464 $520 $577 $643 $703
Furniture & Fixtures: N/A N/A $29 $32 $36 $40 $44
Total CapEx: $689 $602 $696 $780 $866 $965 $1,054

Net PP&E: $1,101 $1,332 $1,663 $1,966 $2,229 $2,453 $2,610

Depreciation % Revenue: 6.6% 8.0% 6.3% 7.3% 8.3% 9.2% 10.2%

Depreciation % CapEx: 43.8% 68.0% 52.4% 61.2% 69.6% 76.8% 85.1%
CapEx % Revenue: 15.1% 11.8% 12.0% 12.0% 12.0% 12.0% 12.0%
CapEx % Net PP&E: 62.6% 45.2% 41.9% 39.7% 38.9% 39.4% 40.4%
 Err:502
($ in millions, except per share amounts)

Err:502 Err:502 Err:502

25th 75th Applicable 25th 75th

Minimum Pecentile Median Pecentile Maximum Err:502 Minimum Pecentile Median Pecentile Maximum
Methodology Name Multiple Multiple Multiple Multiple Multiple Figure Multiple Multiple Multiple Multiple Multiple

Public Company Comparables:

TTM TEV / Revenue: 2.0 x 2.0 x 3.0 x 6.3 x 13.7 x $ 5,113 $ 21.33 $ 21.33 $ 21.33 $ 21.33 $ 21.33 $ 10,391 $ 10,424 $ 15,176 $ 32,398 $ 69,842
12/31/2008 TEV / Revenue: 1.6 x 1.8 x 2.7 x 4.9 x 9.3 x 5,801 21.33 21.33 21.33 21.33 21.33 9,082 10,572 15,529 28,411 53,681
12/31/2009 TEV / Revenue: 1.3 x 1.6 x 2.4 x 3.9 x 6.8 x 6,500 21.33 21.33 21.33 21.33 21.33 8,483 10,619 15,401 25,578 43,902
TTM TEV / EBITDA: 10.3 x 14.5 x 19.5 x 24.1 x 27.5 x 1,927 21.33 21.33 21.33 21.33 21.33 19,809 27,976 37,525 46,530 53,061
12/31/2008 TEV / EBITDA: 9.5 x 13.3 x 15.2 x 17.2 x 21.4 x 2,045 21.33 21.33 21.33 21.33 21.33 19,495 27,289 31,040 35,099 43,820
12/31/2009 TEV / EBITDA: 8.2 x 10.9 x 12.1 x 13.5 x 16.9 x 2,194 21.33 21.33 21.33 21.33 21.33 17,990 23,820 26,502 29,708 37,106

Precedent Transactions:
TTM TEV / Revenue: 1.0 x 1.9 x 4.7 x 10.9 x 13.4 x $ 5,113 $ 21.33 $ 21.33 $ 21.33 $ 21.33 $ 21.33 $ 5,351 $ 9,703 $ 24,126 $ 55,496 $ 68,373
Forward Year 1 TEV / Revenue: 1.1 x 1.9 x 5.5 x 10.2 x 12.1 x 5,801 21.33 21.33 21.33 21.33 21.33 6,226 10,935 32,148 59,015 70,437
TTM TEV / EBITDA: 7.9 x 20.5 x 31.8 x 41.0 x 47.0 x 1,927 21.33 21.33 21.33 21.33 21.33 15,169 39,561 61,241 79,086 90,633
Forward Year 1 TEV / EBITDA: 7.1 x 20.2 x 23.4 x 35.4 x 48.6 x 2,045 21.33 21.33 21.33 21.33 21.33 14,564 41,264 47,880 72,377 99,322

Public Company Premiums:

1-Day Premiums: 3.9% 16.8% 23.4% 50.4% 151.4% $ 19.05 $ 19.78 $ 22.26 $ 23.50 $ 28.65 $ 47.89
20-Day Premiums: 15.6% 24.1% 26.8% 59.5% 108.5% 23.72 27.43 29.44 30.07 37.84 49.45

Discounted Cash Flow Analysis:

5-9% Growth Rate, 11-15% Discount Rate $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47
 Public Company Comparables
TTM TEV / Revenue:
12/31/2008 TEV / Revenue:
12/31/2009 TEV / Revenue:
TTM TEV / EBITDA:
12/31/2008 TEV / EBITDA:
12/31/2009 TEV / EBITDA:
Precedent Transactions
TTM TEV / Revenue:
Forward Year 1 TEV / Revenue:
TTM TEV / EBITDA:
Forward Year 1 TEV / EBITDA:
Public Company Premiums
1-Day Premiums:
20-Day Premiums:
Discounted Cash Flow Analysis
5-9% Growth Rate, 11-15% Discount Rate

$- $10.00 $20.00 $30.00 $40.00 $50.00

Min. 25th Median 75th

5-9% Growth Rate, 11-15% Discount Rate $ 20.47 $ 20.47 $ 20.47 $ 20.47

20-Day Premiums: $ 27.43 $ 29.44 $ 30.07 $ 37.84

1-Day Premiums: $ 19.78 $ 22.26 $ 23.50 $ 28.65

Forward Year 1 TEV / EBITDA: $ 21.33 $ 21.33 $ 21.33 $ 21.33

TTM TEV / EBITDA: $ 21.33 $ 21.33 $ 21.33 $ 21.33
Forward Year 1 TEV / Revenue: $ 21.33 $ 21.33 $ 21.33 $ 21.33
TTM TEV / Revenue: $ 21.33 $ 21.33 $ 21.33 $ 21.33

12/31/2009 TEV / EBITDA: $ 21.33 $ 21.33 $ 21.33 $ 21.33

12/31/2008 TEV / EBITDA: $ 21.33 $ 21.33 $ 21.33 $ 21.33
TTM TEV / EBITDA: $ 21.33 $ 21.33 $ 21.33 $ 21.33
12/31/2009 TEV / Revenue: $ 21.33 $ 21.33 $ 21.33 $ 21.33
12/31/2008 TEV / Revenue: $ 21.33 $ 21.33 $ 21.33 $ 21.33
TTM TEV / Revenue: $ 21.33 $ 21.33 $ 21.33 $ 21.33
 75th to Max
Median to 75th
25th to Median
Min to 25th
Column L

$40.00 $50.00 $60.00

Max Min Point 25 Point Med Point 75 Point Max Point

$ 20.47 $ 20.47 $ - $ - $ - $ -

$ 49.45 $ 27.43 $ 2.01 $ 0.63 $ 7.77 $ 11.61

$ 47.89 $ 19.78 $ 2.47 $ 1.25 $ 5.14 $ 19.24

$ 21.33 $ 21.33 $ - $ - $ - $ -
$ 21.33 $ 21.33 $ - $ - $ - $ -
$ 21.33 $ 21.33 $ - $ - $ - $ -
$ 21.33 $ 21.33 $ - $ - $ - $ -

$ 21.33 $ 21.33 $ - $ - $ - $ -
$ 21.33 $ 21.33 $ - $ - $ - $ -
$ 21.33 $ 21.33 $ - $ - $ - $ -
$ 21.33 $ 21.33 $ - $ - $ - $ -
$ 21.33 $ 21.33 $ - $ - $ - $ -
$ 21.33 $ 21.33 $ - $ - $ - $ -
Comparable Companies - Diversified Internet Companies with Over $1 Billion TTM Revenue
($ in millions, except per share amounts)

Operating Statistics Capitalization

Equity Enterprise Revenue EBITDA
Company Name Value Value TTM 12/31/2008 12/31/2009 TTM
Google Inc. $ 174,565 $ 159,287 $ 11,660 $ 17,212 $ 23,583 $ 6,921
eBay Inc. 34,925 29,889 7,672 8,674 9,978 2,908
Amazon.com, Inc. 31,964 30,151 14,835 19,258 23,102 1,095
IAC/InterActiveCorp 14,408 13,009 6,373 6,817 7,463 817

Maximum $ 174,565 $ 159,287 $ 14,835 $ 19,258 $ 23,583 $ 6,921

75th Percentile 69,835 62,435 12,454 17,724 23,222 3,911
Median $ 33,444 $ 30,020 $ 9,666 $ 12,943 $ 16,540 $ 2,001
25th Percentile 27,575 25,669 7,348 8,210 9,349 1,025
Minimum 14,408 13,009 6,373 6,817 7,463 817

Yahoo! Inc. $ 25,473 $ 18,509 $ 5,113 $ 5,801 $ 6,500 $ 1,927

Valuation Statistics Capitalization Enterprise Value / Enterprise Value /

Equity Enterprise Revenue EBITDA
Company Name Value Value TTM 12/31/2008 12/31/2009 TTM
Google Inc. $ 174,565 $ 159,287 13.7 x 9.3 x 6.8 x 23.0 x
eBay Inc. 34,925 29,889 3.9 x 3.4 x 3.0 x 10.3 x
Amazon.com, Inc. 31,964 30,151 2.0 x 1.6 x 1.3 x 27.5 x
IAC/InterActiveCorp 14,408 13,009 2.0 x 1.9 x 1.7 x 15.9 x

Maximum $ 174,565 $ 159,287 13.7 x 9.3 x 6.8 x 27.5 x

75th Percentile 69,835 62,435 6.3 x 4.9 x 3.9 x 24.1 x
Median $ 33,444 $ 30,020 3.0 x 2.7 x 2.4 x 19.5 x
25th Percentile 27,575 25,669 2.0 x 1.8 x 1.6 x 14.5 x
Minimum 14,408 13,009 2.0 x 1.6 x 1.3 x 10.3 x

Yahoo! Inc. $ 25,473 $ 18,509 3.6 x 3.2 x 2.8 x 9.6 x

 Projected
EBITDA EPS Revenue EBITDA Margin
12/31/2008 12/31/2009 TTM 12/31/2008 12/31/2009 Growth TTM 12/31/2008
$ 10,118 $ 13,567 $ 13.68 $ 21.16 $ 26.93 37.0% 59.4% 58.8%
3,135 3,646 1.30 1.65 1.94 15.0% 37.9% 36.1%
1,407 1,783 1.48 1.86 2.40 20.0% 7.4% 7.3%
890 1,048 1.73 1.61 1.97 9.5% 12.8% 13.1%

$ 10,118 $ 13,567 $ 13.68 $ 21.16 $ 26.93 37.0% 59.4% 58.8%

4,881 6,126 4.72 6.69 8.53 24.2% 43.3% 41.8%
$ 2,271 $ 2,714 $ 1.61 $ 1.76 $ 2.19 17.5% 25.4% 24.6%
1,278 1,599 1.44 1.64 1.96 13.6% 11.5% 11.6%
890 1,048 1.30 1.61 1.94 9.5% 7.4% 7.3%

$ 2,045 $ 2,194 $ 0.86 $ 0.86 $ 0.87 12.1% 37.7% 35.3%

Enterprise Value /
EBITDA P / E Multiple
12/31/2008 12/31/2009 TTM 12/31/2008 12/31/2009
15.7 x 11.7 x 40.1 x 25.9 x 20.4 x
9.5 x 8.2 x 20.3 x 15.9 x 13.6 x
21.4 x 16.9 x 50.0 x 39.9 x 30.9 x
14.6 x 12.4 x 29.4 x 31.6 x 25.8 x

21.4 x 16.9 x 50.0 x 39.9 x 30.9 x

17.2 x 13.5 x 42.6 x 33.7 x 27.1 x
15.2 x 12.1 x 34.7 x 28.8 x 23.1 x
13.3 x 10.9 x 27.1 x 23.4 x 18.7 x
9.5 x 8.2 x 20.3 x 15.9 x 13.6 x

9.1 x 8.4 x 22.1 x 22.2 x 21.9 x

BITDA Margin
12/31/2009
57.5%
36.5%
7.7%
14.0%

57.5%
41.8%
25.3%
12.5%
7.7%

33.8%
 GOOG
Google Inc.
Calendarization Calendarization
Old Partial New Partial FY TTM Old Partial New Partial
Revenue: $11,660 $11,660
COGS: $1,715 $1,715
Gross Profit: $0 $0 $9,945 $9,945 $0 $0
Operating Expenses: $4,861 $4,861
Other Income / (Expense): $590 $590
Pre-Tax Income: $0 $0 $5,674 $5,674 $0 $0
Taxes: $1,470 $1,470
Minority Interest Earnings: $0 $0
Net Income: $0 $0 $4,204 $4,204 $0 $0
Amortization: $160 $160
Depreciation: $808 $808
Stock-Based Compensation: $869 $869
Non-Recurring Charges: $0 $0
Tax Rate: 35%

Pro Forma Net Income: $0 $0 $4,357 $4,357 $0 $0

Pro Forma EPS: $13.68

EBITDA: $0 $0 $6,921 $6,921 $0 $0

EBIT: $0 $0 $5,953 $5,953 $0 $0

Balance Sheet Data Balance Sheet Data

Cash & Cash-Equivalents: $15,278
Debt: $0
Preferred Stock: $0
Minority Interest: $0

Equity Research Projections Equity Research Projections

 12/31/2008 12/31/2009 12/31/2010 12/31/2008 12/31/2009
Bank: CS
Date: 3.26.08
Revenue: $17,212 $23,583 N/A $8,674 $9,978
EBITDA: $10,118 $13,567 N/A $3,135 $3,646
EBIT: $8,674 $11,422 N/A $2,735 $3,140
Pro-Forma EPS: $21.16 $26.93 N/A $1.65 $1.94

Diluted Shares Calculation Diluted Shares Calculation

Current Share Price: $548.27
Common Shares: 313.38
Options:
Total Strike Dilution Total
2.28 $18.07 2.20 117.86
1.68 $176.42 1.14
1.39 $274.52 0.69
1.79 $329.55 0.71
1.47 $449.90 0.26
3.72 $556.92 0.00
0.15 $663.13 0.00
0.05 $718.16 0.00
0.00
Total Diluted Shares: 318.39

Valuation Metrics Valuation Metrics

Equity Value: $174,565

Enterprise Value: $159,287
Beta: 1.29

Valuation Multiples Valuation Multiples

TTM 12/31/2008 12/31/2009 12/31/2010 TTM 12/31/2008
TEV / Revenue: 13.7 x 9.3 x 6.8 x N/A 3.9 x 3.4 x
TEV / EBITDA: 23.0 x 15.7 x 11.7 x N/A 10.3 x 9.5 x
TEV / EBIT: 26.8 x 18.4 x 13.9 x N/A 13.0 x 10.9 x
Pro-Forma P/E: 40.1 x 25.9 x 20.4 x N/A 20.3 x 15.9 x

Lookup Variables Lookup Variables

12/31/2008 Revenue: $17,212

12/31/2008 EBITDA: $10,118
12/31/2008 EBIT: $8,674
12/31/2008 Pro-Forma EPS: $21.16

12/31/2009 Revenue: $23,583

12/31/2009 EBITDA: $13,567
12/31/2009 EBIT: $11,422
12/31/2009 Pro-Forma EPS: $26.93

12/31/2010 Revenue: N/A

12/31/2010 EBITDA: N/A
12/31/2010 EBIT: N/A
12/31/2010 Pro-Forma EPS: N/A

TTM TEV / Revenue: 13.7 x

TTM TEV / EBITDA: 23.0 x
TTM TEV / EBIT: 26.8 x
TTM Pro-Forma P/E: 40.1 x

12/31/2008 TEV / Revenue: 9.3 x

12/31/2008 TEV / EBITDA: 15.7 x
12/31/2008 TEV / EBIT: 18.4 x
12/31/2008 Pro-Forma P/E: 25.9 x

12/31/2009 TEV / Revenue: 6.8 x

12/31/2009 TEV / EBITDA: 11.7 x
12/31/2009 TEV / EBIT: 13.9 x
12/31/2009 Pro-Forma P/E: 20.4 x

12/31/2010 TEV / Revenue: N/A

12/31/2010 TEV / EBITDA: N/A
12/31/2010 TEV / EBIT: N/A
12/31/2010 Pro-Forma P/E: N/A
 EBAY AMZN
eBay Inc. Amazon.com, Inc. IAC/InterActiveCorp
Calendarization Calendarization Calendarization
FY TTM Old Partial New Partial FY TTM Old Partial New Partial FY
$7,672 $7,672 $14,835 $14,835 $6,373
$1,763 $1,763 $11,482 $11,482 $3,374
$5,909 $5,909 $0 $0 $3,353 $3,353 $0 $0 $2,999
$5,296 $5,296 $2,698 $2,698 $3,159
$138 $138 $5 $5 $87
$751 $751 $0 $0 $660 $660 $0 $0 ($72)
$403 $403 $184 $184 $138
$0 $0 $0 $0 $5
$348 $348 $0 $0 $476 $476 $0 $0 ($206)
$204 $204 $129 $129 $206
$398 $398 $117 $117 $156
$302 $302 $185 $185 $106
$1,391 $1,391 $9 $9 $508
35% 35%

$1,721 $1,721 $0 $0 $639 $639 $0 $0 $491

$1.30 $1.48

$2,908 $2,908 $0 $0 $1,095 $1,095 $0 $0 $817

$2,306 $2,306 $0 $0 $849 $849 $0 $0 $454

Balance Sheet Data Balance Sheet Data Balance Sheet Data

$5,036 $3,112
$0 $1,299
$0 $0
$0 $0

uity Research Projections Equity Research Projections Equity Research Projections

 12/31/2010 12/31/2008 12/31/2009 12/31/2010 12/31/2008 12/31/2009 12/31/2010
CS Canaccord
3.11.08 3.17.08
N/A $19,258 $23,102 N/A $6,817 $7,463 N/A
N/A $1,407 $1,783 N/A $890 $1,048 N/A
N/A $1,148 $1,497 N/A $443 $579 N/A
N/A $1.86 $2.40 N/A $1.61 $1.97 N/A

iluted Shares Calculation Diluted Shares Calculation Diluted Shares Calculation

$26.30 $74.21
1,327.95 416.82

Strike Dilution Total Strike Dilution Total Strike

$32.45 0.00 18.18 $17.46 13.90 0.91 $6.05
0.00 0.00 1.68 $14.64
0.00 0.00 3.46 $25.18
0.00 0.00 4.03 $34.28
0.00 0.00 1.87 $47.39
0.00 0.00 0.06 $51.23
0.00 0.00 0.01 $68.18
0.00 0.00 0.00 $71.91
0.00 0.00 0.02 $102.12
1,327.95 430.72

Valuation Metrics Valuation Metrics Valuation Metrics

$34,925 $31,964
$29,889 $30,151
1.96 1.28

Valuation Multiples Valuation Multiples Valuation Multiples

12/31/2009 12/31/2010 TTM 12/31/2008 12/31/2009 12/31/2010 TTM 12/31/2008 12/31/2009
3.0 x N/A 2.0 x 1.6 x 1.3 x N/A 2.0 x 1.9 x 1.7 x
 8.2 x N/A 27.5 x 21.4 x 16.9 x N/A 15.9 x 14.6 x 12.4 x
9.5 x N/A 35.5 x 26.3 x 20.1 x N/A 28.7 x 29.4 x 22.5 x
13.6 x N/A 50.0 x 39.9 x 30.9 x N/A 29.4 x 31.6 x 25.8 x

Lookup Variables Lookup Variables Lookup Variables

$8,674 $19,258
$3,135 $1,407
$2,735 $1,148
$1.65 $1.86

$9,978 $23,102
$3,646 $1,783
$3,140 $1,497
$1.94 $2.40

N/A N/A
N/A N/A
N/A N/A
N/A N/A

3.9 x 2.0 x
10.3 x 27.5 x
13.0 x 35.5 x
20.3 x 50.0 x

3.4 x 1.6 x
9.5 x 21.4 x
10.9 x 26.3 x
15.9 x 39.9 x

3.0 x 1.3 x
8.2 x 16.9 x
 9.5 x 20.1 x
13.6 x 30.9 x

N/A N/A
N/A N/A
N/A N/A
N/A N/A
 IACI YHOO
IAC/InterActiveCorp Yahoo! Inc.
zation Calendarization
TTM Old Partial New Partial FY TTM
$6,373 $5,113 $5,113
$3,374 $982 $982
$2,999 $0 $0 $4,131 $4,131
$3,159 $3,435 $3,435
$87 $154 $154
($72) $0 $0 $849 $849
$138 $337 $337
$5 ($3) ($3)
($206) $660 $660
$206 $250 $250
$156 $409 $409
$106 $572 $572
$508 $0 $0
35% 40%

$491 $0 $0 $1,151 $1,151

$1.73 $0.86

$817 $0 $0 $1,927 $1,927

$454 $0 $0 $1,268 $1,268

eet Data
$2,386 $2,363
$946 $750
$0 $0
$40 $12

h Projections Projections
 12/31/2008 12/31/2009 12/31/2010
Oppenh. N/A
3.4.08 N/A
$5,801 $6,500 $7,217
$2,045 $2,194 $2,380
$1,433 $1,578 $1,671
$0.86 $0.87 $0.90

Calculation
$50.88 $19.05 $23.72
277.99 1,337.17

Dilution Total Strike Dilution

0.80 180.40 $29.36 0.00
1.20 36.57 $22.55 0.00
1.75 0.00
1.31 0.00
0.13 0.00
0.00 0.00
0.00 0.00
0.00 0.00
0.00 0.00
283.18 1,337.17

Metrics

$14,408 $25,473
$13,009 $18,509
0.80 1.39

Multiples Valuation Multiples

12/31/2010 TTM 12/31/2008 12/31/2009 12/31/2010
N/A 3.6 x 3.2 x 2.8 x 2.6 x
 N/A 9.6 x 9.1 x 8.4 x 7.8 x
N/A 14.6 x 12.9 x 11.7 x 11.1 x
N/A 22.1 x 22.2 x 21.9 x 21.3 x

riables

$6,817 $5,801
$890 $2,045
$443 $1,433
$1.61 $0.86

$7,463 $6,500
$1,048 $2,194
$579 $1,578
$1.97 $0.87

N/A $7,217
N/A $2,380
N/A $1,671
N/A $0.90

2.0 x 3.6 x
15.9 x 9.6 x
28.7 x 14.6 x
29.4 x 22.1 x

1.9 x 3.2 x
14.6 x 9.1 x
29.4 x 12.9 x
31.6 x 22.2 x

1.7 x 2.8 x
12.4 x 8.4 x
 22.5 x 11.7 x
25.8 x 21.9 x

N/A 2.6 x
N/A 7.8 x
N/A 11.1 x
N/A 21.3 x
Err:502 Err:502

Market Cap (B Yen): 2,267,000.0 Market Cap (HKD):

Yen Exchange Rate: 106.9 HKD Exchange Rate:
Market Cap (USD): $21,206.7 Market Cap (USD):
Ownership Stake: 33% Ownership Stake:
Value of Yahoo's Stake: $6,998.2 Value of Yahoo's Stake:
Lack of Control Discount: 20% Lack of Control Discount:
Sale Value: $5,598.6 Sale Value:
Taxes: $2,239.4 Taxes:
Proceeds to Yahoo: $3,359.1 Proceeds to Yahoo:

Err:502 Err:502

Market Cap (USD): $1,047.0 Book Value of Alibaba Assets:

Ownership Stake: 10% % in Non-Public Assets:
Value of Yahoo's Stake: $104.7 Value of Yahoo's Stake:
Lack of Control Discount: 20% Sale Value:
Sale Value: $83.8 Taxes:
Taxes: $33.5 Proceeds to Yahoo:
Proceeds to Yahoo: $50.3

Total Value of Non-Core Assets: $5,362.3

 et Cap (HKD): HKD 100,800.0
Exchange Rate: 7.8
et Cap (USD): $12,923.1
ership Stake: 28%
e of Yahoo's Stake: $3,618.5
of Control Discount: 20%
$2,894.8
$1,157.9
oceeds to Yahoo: $1,736.9

Value of Alibaba Assets: $1,440.3

Non-Public Assets: 25%
e of Yahoo's Stake: $360.1
$360.1
$144.0
oceeds to Yahoo: $216.0
Err:502

Discount Rate: 10%

Federal NOLs: $808.0
State NOLs: $354.0
Total NOLs: $1,162.0

Historical Projected
FY 2006 FY 2007 FY 2008E FY 2009E
Pre-Tax Income: $1,098 $849 $890 $940
Normal Taxes: $458 $337 $356 $376

NOL-Adjusted Pre-Tax Income: $0 $668

Post-NOL Taxes: $0 $267
Remaining NOLs: $272 $0
Tax Savings: $356 $109

NPV of Tax Savings: $413.5

Err:502

Yahoo! Purchase Price: $10,000.0

Adjusted Long-Term Rate: 4.48%
Discount Rate: 10%
Federal NOLs: $808.0
State NOLs: $354.0
Total NOLs: $1,162.0
Allowed NOL Usage Per Year: $448.0

Historical Projected
FY 2006 FY 2007 FY 2008E FY 2009E
Pre-Tax Income: $1,098 $849 $890 $940
Normal Taxes: $458 $337 $356 $376

Potential NOL Usage: $890 $714

Allowed NOL Usage: $448 $448
NOL-Adjusted Pre-Tax Income: $442 $492
Post-NOL Taxes: $177 $197
Remaining NOLs: $714 $266
Tax Savings: $179 $179

NPV of Tax Savings: $390.9

Projected
FY 2010E FY 2011E FY 2012E
$952 $1,035 $1,093
$381 $414 $437

$952 $1,035 $1,093

$381 $414 $437
$0 $0 $0
$0 $0 $0

Projected
FY 2010E FY 2011E FY 2012E
$952 $1,035 $1,093
$381 $414 $437

$266 $0 $0
$266 $0 $0
$686 $1,035 $1,093
$275 $414 $437
$0 $0 $0
$106 $0 $0
Precedent Transactions - Internet M&A Deals Worth Over $500MM with US-Based Sellers Since 1/1/2006
($ in millions, except per share amounts)

Err:502 Operating Metric

Acquisition Equity Enterprise TTM

Acquirer Name Target Name Date Value Value Revenue
Microsoft aQuantive 5/18/2007 $ 6,356 $ 6,041 $ 493
Google DoubleClick 4/13/2007 3,100 3,100 232
Publicis Digitas 12/21/2006 1,285 1,137 713
Yahoo Right Media (Remaining 80%) 4/29/2007 850 850 N/A
Investor Group Vertrue 3/22/2007 641 730 697
NBC Universal iVillage 3/6/2006 660 604 91
WPP Group 24/7 Real Media 5/17/2007 669 603 215

Maximum $ 6,356 $ 6,041 $ 713

75th Percentile 2,192 2,119 646
Median $ 850 $ 850 $ 362
25th Percentile 664 667 219
Minimum 641 603 91
llers Since 1/1/2006

Operating Metrics Valuation Multiples - Acquisition

Forward Forward Forward Forward
Year 1 TTM Year 1 TTM Year 1 TTM Year 1
Revenue EBITDA EBITDA Revenue Revenue EBITDA EBITDA
$ 610 $ 128 $ 154 12.3 x 9.9 x 47.0 x 39.1 x
297 72 98 13.4 x 10.4 x 43.1 x 31.7 x
743 64 63 1.6 x 1.5 x 17.8 x 18.0 x
70 N/A 18 N/A 12.1 x N/A 48.6 x
680 93 102 1.0 x 1.1 x 7.9 x 7.1 x
109 17 26 6.6 x 5.5 x 34.8 x 23.4 x
269 21 27 2.8 x 2.2 x 28.7 x 22.4 x

$ 743 $ 128 $ 154 13.4 x 12.1 x 47.0 x 48.6 x

645 87 100 10.9 x 10.2 x 41.0 x 35.4 x
$ 297 $ 68 $ 63 4.7 x 5.5 x 31.8 x 23.4 x
189 32 26 1.9 x 1.9 x 20.5 x 20.2 x
70 17 18 1.0 x 1.1 x 7.9 x 7.1 x
 AQNT
aQuantive

Microsoft
Calendarization Calendarization
Old Partial New Partial FY TTM Old Partial New Partial
Revenue: $92 $143 $442 $493
COGS: $13 $24 $68 $78
Gross Profit: $79 $119 $375 $415 $0 $0
Operating Expenses: $68 $100 $299 $331
Amortization: $2 $3 $9 $10
Depreciation: $4 $5 $16 $18
Stock-Based Compensation: $5 $5 $19 $19
Non-Recurring Charges: $2 $0 $0 ($2)

EBITDA: $24 $32 $120 $128

EBIT: $18 $24 $95 $100

Balance Sheet Data Balance Sheet Data

Cash & Cash-Equivalents: $316
Debt: $0
Preferred Stock: $0
Minority Interest: $0

Equity Research Projections Equity Research Projections

12/31/2007 12/31/2008 12/31/2007 12/31/2008
Bank: CS
Date: 5.8.07
Revenue: $610 $749 $297 $379
EBITDA: $154 $198 $98 $101
EBIT: $119 $153 N/A N/A
 Diluted Shares Calculation Diluted Shares Calculation
Announcement Date: 5/18/2007
Offer Price: $66.50
Common Shares: 78.92
Options:
Total Strike Dilution Total
12.64 $11.27 10.50
6.16 $12.98 6.16
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Total Diluted Shares: 95.58

Valuation Metrics Valuation Metrics

Equity Value: $6,356

Enterprise Value: $6,041

Valuation Multiples Valuation Multiples

TTM 12/31/2007 12/31/2008 TTM 12/31/2007
TEV / Revenue: 12.3 x 9.9 x 8.1 x 13.4 x 10.4 x
TEV / EBITDA: 47.0 x 39.1 x 30.5 x 43.1 x 31.7 x
TEV / EBIT: 60.2 x 50.7 x 39.4 x N/A N/A

Lookup Variables Lookup Variables

Forward Year 1 Revenue: $610

Forward Year 1 EBITDA: $154
Forward Year 1 EBIT: $119

Forward Year 2 Revenue: $749

Forward Year 2 EBITDA: $198
Forward Year 2 EBIT: $153

TTM TEV / Revenue: 12.3 x

TTM TEV / EBITDA: 47.0 x
TTM TEV / EBIT: 60.2 x

Forward Year 1 TEV / Revenue: 9.9 x

Forward Year 1 TEV / EBITDA: 39.1 x
Forward Year 1 TEV / EBIT: 50.7 x

Forward Year 2 TEV / Revenue: 8.1 x

Forward Year 2 TEV / EBITDA: 30.5 x
Forward Year 2 TEV / EBIT: 39.4 x
 DBLK DTAS
DoubleClick Digitas Right Media (Remaining 80%)

Google Publicis
Calendarization Calendarization Calendarization
FY TTM Old Partial New Partial FY TTM Old Partial New Partial FY
$232 $232 $406 $554 $565 $713 N/A
$0 $149 $174 $198 $223
$232 $232 $257 $379 $367 $489 N/A N/A N/A
$0 $230 $350 $330 $451
$0 $2 $3 $3 $4
$0 $7 $9 $10 $11
$0 $2 $6 $2 $7
$0 $0 $2 $1 $3

$72 $72 $38 $49 $53 $64 N/A

N/A N/A $29 $37 $41 $49 N/A

Balance Sheet Data Balance Sheet Data Balance Sheet Data

$147
$0
$0
$0

uity Research Projections Equity Research Projections Equity Research Projections

12/31/2006 12/31/2007 12/31/2007 12/31/2008
JPM JEF
3.11.08 1/31/2007
$743 $899 $70 N/A
$63 $78 $18 N/A
$47 $58 N/A N/A
iluted Shares Calculation Diluted Shares Calculation Diluted Shares Calculation
4/13/2007 12/21/2006
N/A $13.50
N/A 86.51

Strike Dilution Total Strike Dilution Total Strike

1.24 $1.00 1.15
5.75 $2.65 4.62
1.94 $4.31 1.32
2.15 $7.54 0.95
2.50 $10.18 0.62
0.91 $14.43 0.00
0.13 $18.59 0.00
0.00
0.00
0.00
0.00
95.16

Valuation Metrics Valuation Metrics Valuation Metrics

$3,100 $1,285
$3,100 $1,137

Valuation Multiples Valuation Multiples Valuation Multiples

12/31/2008 TTM 12/31/2006 12/31/2007 TTM 12/31/2007 12/31/2008
8.2 x 1.6 x 1.5 x 1.3 x N/A 12.1 x N/A
30.8 x 17.8 x 18.0 x 14.6 x N/A 48.6 x N/A
N/A 23.3 x 24.0 x 19.6 x N/A N/A N/A

Lookup Variables Lookup Variables Lookup Variables

$297 $743
 $98 $63
N/A $47

$379 $899
$101 $78
N/A $58

13.4 x 1.6 x
43.1 x 17.8 x
N/A 23.3 x

10.4 x 1.5 x
31.7 x 18.0 x
N/A 24.0 x

8.2 x 1.3 x
30.8 x 14.6 x
N/A 19.6 x
 RTMD VTRU IVIL
Media (Remaining 80%) Vertrue iVillage

Yahoo Investor Group NBC Universal

zation Calendarization Calendarization
TTM Old Partial New Partial FY TTM Old Partial New Partial FY TTM
N/A $318 $356 $659 $697 $91 $91
$0 $0 $0 $0 $0 $0 $0
N/A $318 $356 $659 $697 $0 $0 $91 $91
$0 $283 $324 $594 $634 $83 $83
$0 $5 $4 $8 $8 $7 $7
$0 $8 $9 $17 $17 $2 $2
$0 $2 $2 $5 $5 $0 $0
$0 $0 $0 $0 $0 $0 $0

N/A $50 $47 $95 $93 $0 $0 $17 $17

N/A $37 $34 $70 $67 $0 $0 $8 $8

eet Data Balance Sheet Data

N/A $60 $56
N/A $149 $0
N/A $0 $0
N/A $0 $0

h Projections Equity Research Projections

12/31/2007 12/31/2008 12/31/2006 12/31/2007
N/A FBW DB
N/A 5.8.07 3.6.06
$680 N/A $109 $125
$102 N/A $26 $34
N/A N/A N/A N/A
 Calculation Diluted Shares Calculation
4/29/2007 3/22/2007 3/6/2006
N/A $48.50 $8.50
N/A 9.70 72.73

Dilution Total Strike Dilution Total Strike Dilution

0.42 $12.40 0.31 0.15 $0.63 0.14
0.38 $16.43 0.25 1.80 $1.20 1.55
0.55 $20.65 0.31 2.09 $1.51 1.72
0.83 $29.47 0.33 0.86 $2.71 0.59
0.36 $36.86 0.09 0.21 $3.51 0.12
2.23 $40.37 2.23 2.53 $5.91 0.77
0.00 0.31 $7.72 0.03
0.00 0.15 $16.17 0.00
0.00 0.27 $25.00 0.00
0.00 0.04 $38.53 0.00
0.00 0.00 $72.94 0.00
13.21 77.64

Metrics Valuation Metrics

$850 $641 $660

$850 $730 $604

Multiples Valuation Multiples Valuation Multiples

TTM 12/31/2007 12/31/2008 TTM 12/31/2006 12/31/2007
1.0 x 1.1 x N/A 6.6 x 5.5 x 4.8 x
7.9 x 7.1 x N/A 34.8 x 23.4 x 17.6 x
10.8 x N/A N/A 71.5 x N/A N/A

riables Lookup Variables

$70 $680 $109

 $18 $102 $26
N/A N/A N/A

N/A N/A $125

N/A N/A $34
N/A N/A N/A

N/A 1.0 x 6.6 x

N/A 7.9 x 34.8 x
N/A 10.8 x 71.5 x

12.1 x 1.1 x 5.5 x

48.6 x 7.1 x 23.4 x
N/A N/A N/A

N/A N/A 4.8 x

N/A N/A 17.6 x
N/A N/A N/A
 TFSM
24/7 Real Media

WPP Group
Calendarization
Old Partial New Partial FY TTM
$43 $58 $200 $215
$27 $39 $129 $141
$16 $19 $71 $74
$23 $19 $79 $75
$1 $1 $4 $4
$1 $1 $4 $4
$9 $3 $20 $14
$0 $0 $0 $0

$4 $4 $20 $21
$2 $3 $12 $13

Balance Sheet Data

$68
$0
$0
$2

Equity Research Projections

12/31/2007 12/31/2008
RBC
5.17.07
$269 $355
$27 $38
N/A N/A
 Diluted Shares Calculation
5/17/2007
$11.75
51.00

Total Strike Dilution

1.10 $1.12 1.00
2.71 $4.19 1.74
3.17 $6.65 1.38
0.15 $80.06 0.00
1.71 $8.75 1.71
0.40 $9.57 0.07
0.00
0.00
0.00
0.00
0.00
56.90

Valuation Metrics

$669
$603

Valuation Multiples
TTM 12/31/2007 12/31/2008
2.8 x 2.2 x 1.7 x
28.7 x 22.4 x 15.8 x
45.2 x N/A N/A

Lookup Variables

$269
 $27
N/A

$355
$38
N/A

2.8 x
28.7 x
45.2 x

2.2 x
22.4 x
N/A

1.7 x
15.8 x
N/A
Premiums Analysis - Internet M&A Deals Worth Over $100MM with Public, US-Based Sellers Since 1/1/2006
($ in millions, except per share amounts)

Err:502 Share Price History

Acquisition Equity Offer

Acquirer Name Target Name Date Value Price 1-Day 20-Day
Microsoft aQuantive 5/18/2007 $ 6,356 $ 66.50 $ 35.87 $ 31.90
Publicis Digitas 12/21/2006 1,285 13.50 10.93 10.96
NBC Universal iVillage 3/6/2006 660 8.50 8.12 7.35
WPP Group 24/7 Real Media 5/17/2007 669 11.75 8.47 8.13
Investor Group Vertrue 3/22/2007 641 48.50 40.12 38.88
Omniture Visual Sciences 10/25/2007 384 18.04 17.37 14.50
Amazon.com Audible 1/31/2008 247 11.50 9.33 8.93
Nokia Loudeye 8/7/2006 127 4.50 1.79 2.20

Maximum $ 6,356 $ 66.50 $ 40.12 $ 38.88

75th Percentile 823 25.66 22.00 18.85
Median $ 650 $ 12.63 $ 10.13 $ 9.95
25th Percentile 350 10.75 8.38 7.94
Minimum 127 4.50 1.79 2.20
ed Sellers Since 1/1/2006

Premiums

1-Day 20-Day
85.4% 108.5%
23.5% 23.2%
4.7% 15.6%
38.7% 44.5%
20.9% 24.7%
3.9% 24.4%
23.3% 28.8%
151.4% 104.5%

151.4% 108.5%
50.4% 59.5%
23.4% 26.8%
16.8% 24.1%
3.9% 15.6%
 Err:502

FY 2008E FY 2009E FY 2010E FY 2011E

Revenue: $ - $ 5,801 $ 6,500 $ 7,217 $ 8,043

EBITDA: - 2,045 2,194 2,380 2,634
Operating Income: - 803 867 876 950

Less: Taxes - 321 347 351 380

Plus: Depreciation - 365 477 602 742

Plus: Amortization - 247 139 106 60
Plus: Stock-Based Compensation - 630 711 795 882

Less: Changes in Working Capital: - (130) (67) (88) (82)

Less: Capital Expenditures - 696 780 866 965

Unlevered Free Cash Flow $ - $ 1,157 $ 1,134 $ 1,251 $ 1,371

Present Value of Free Cash Flow $ - $ 1,089 $ 945 $ 922 $ 895

Projection Year: 0.000 1.000 2.000 3.000 4.000

Stub Mid-Year Conversion Discount: 0.000 0.500 1.500 2.500 3.500
Normal Mid-Year Conversion Discount: 0.500 1.500 2.500 3.500

Free Cash Flow Growth Rate: (2.0%) 10.3% 9.6%

Err:502
Discount Rate
$ 20.47 10.0% 11.0% 12.0% 13.0% 14.0% 15.0% 16.0%
4.0% $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47
Growth Rate

5.0% $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47

Terminal

6.0% $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47

7.0% $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47
8.0% $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47
9.0% $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47

Err:502
Discount Rate
$ 20.47 10.0% 11.0% 12.0% 13.0% 14.0% 15.0% 16.0%
6.0 x $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47
7.0 x $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47
Terminal

Multiple
EBITDA

8.0 x $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47

9.0 x $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47
10.0 x $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47
11.0 x $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47 $ 20.47
 Err:502

FY 2012E Use Stub Period? No

Stub Period: 0.250
$ 8,784 Use Multiples Method? No
2,885
994 Discount Rate: 13.0%

398 Terminal EBITDA Multiple: 9.0 x

Terminal Growth Rate: 7.0%
897 Terminal Value: $ 27,143
34 Implied EBITDA Multiple: 9.4 x
960
PV of Terminal Value: $ 15,682
(80) Sum of PV of Cash Flows: 4,725
1,054 Enterprise Value: $ 20,408

$ 1,513 Terminal Value % EV: 76.8%

$ 874
Enterprise Value: $ 20,408
5.000 Balance Sheet Adjustment: 1,602
4.500 Equity Interests: 5,362
4.500 Cancel Convertible?: -
Implied Equity Value: $ 27,371
10.3%
Diluted Shares Outstanding: 1,337
Implied Share Price: $ 20.47

17.0% Options: 180.40 $ 29.36 -

$ 20.47 Convert: 36.57 22.55 -
$ 20.47
$ 20.47
$ 20.47
$ 20.47
$ 20.47

17.0%
$ 20.47
$ 20.47
$ 20.47
$ 20.47
$ 20.47
$ 20.47
Discount Rate Calculation - Assumptions
Risk-Free Rate: 4.31%
Equity Risk Premium: 7.00%
Interest Rate on Debt: 0.00%

Comparable Companies - Unlevered Beta Calculation

Levered Equity Unlevered
Name Beta Debt Value Tax Rate Beta
Google Inc. 1.29 $ - $ 174,565 35% 1.29
eBay Inc. 1.96 - 34,925 35% 1.96
Amazon.com, Inc. 1.28 1,299 31,964 35% 1.25
IAC/InterActiveCorp 0.80 946 14,408 35% 0.77

Median 1.27

Yahoo! Inc. 1.39

Err:502
Unlevered Equity Levered
Beta Debt Value Tax Rate Beta

Yahoo! Inc. 1.27 $ 750 $ 25,473 40% 1.29

Cost of Equity Based on Comparables: 13.35%

Cost of Equity Based on Historical Beta: 14.04%

WACC = Cost of Equity * % Equity + Cost of Debt * % Debt * (1 - Tax Rate) + Cost of Preferred Stock * % Preferred

WACC 12.96%
of Preferred Stock * % Preferred Stock
 Err:502 Implied Share Price Based on P/E o
Current Share Price: $ 19.05
Err:502 $ 0.86 Median
12/31/2008 Pro-Forma EPS: $ 0.86 P/E of
TTM Pro-Forma P/E: 22.1 x Comparables
Median Pro-Forma P/E of Comparables: 34.7 x 34.7 x

Err:502

Implied
Future
Share
P/E Price 10.0% 11.0% 12.0%

20.0 x $ 17.19 $ 15.62 $ 15.48 $ 15.34

22.0 x $ 18.90 $ 17.19 $ 17.03 $ 16.88
22.1 x $ 19.02 $ 17.29 $ 17.13 $ 16.98
24.0 x $ 20.62 $ 18.75 $ 18.58 $ 18.41
26.0 x $ 22.34 $ 20.31 $ 20.13 $ 19.95
28.0 x $ 24.06 $ 21.87 $ 21.68 $ 21.48
30.0 x $ 25.78 $ 23.43 $ 23.22 $ 23.02
32.0 x $ 27.50 $ 25.00 $ 24.77 $ 24.55
34.0 x $ 29.22 $ 26.56 $ 26.32 $ 26.09
34.7 x $ 29.83 $ 27.12 $ 26.88 $ 26.64
36.0 x $ 30.93 $ 28.12 $ 27.87 $ 27.62
38.0 x $ 32.65 $ 29.68 $ 29.42 $ 29.15
40.0 x $ 34.37 $ 31.25 $ 30.96 $ 30.69
Implied Share Price Based on P/E of Comparables
Yahoo! Inc. Implied
12/31/2008 Future
Pro-Forma Share
EPS Price
$ 0.86 $ 29.83

13.0% 14.0% 15.0% 16.0%

$ 15.21 $ 15.08 $ 14.94 $ 14.82

$ 16.73 $ 16.58 $ 16.44 $ 16.30
$ 16.83 $ 16.68 $ 16.54 $ 16.40
$ 18.25 $ 18.09 $ 17.93 $ 17.78
$ 19.77 $ 19.60 $ 19.43 $ 19.26
$ 21.29 $ 21.11 $ 20.92 $ 20.74
$ 22.81 $ 22.61 $ 22.42 $ 22.22
$ 24.33 $ 24.12 $ 23.91 $ 23.70
$ 25.85 $ 25.63 $ 25.40 $ 25.19
$ 26.40 $ 26.17 $ 25.94 $ 25.72
$ 27.38 $ 27.14 $ 26.90 $ 26.67
$ 28.90 $ 28.64 $ 28.39 $ 28.15
$ 30.42 $ 30.15 $ 29.89 $ 29.63
 Err:502

Projected Low High Low

FY 2008E Multiple Multiple EV

Revenue by Segment:
Search Advertising: $ 1,384 6.0 x 7.0 x $ 8,302
Display Advertising: 2,415 4.0 x 5.0 x 9,660
Affiliate Site Revenue: 656 2.0 x 3.0 x 1,313
Premium Fees: 934 2.0 x 3.0 x 1,868
Other Revenue: 412 1.0 x 2.0 x 412
Total: $ 5,801 15.0 x 20.0 x $ 21,554

Implied Share Value: $ 21.33

 High
EV

$ 9,685
12,075
1,969
2,802
823
$ 27,355

$ 21.33
Err:502
Assumed Recovery
FY 2007 Low -

Assets
Current Assets:
Cash and Cash Equivalents: $1,514 95.0%
Short-Term Debt Investments: $488 70.0%
Accounts Receivable, Net: $1,056 95.0%
Prepaid Expenses & Other Current Assets: $181 95.0%
Total Current Assets: $3,238
Long-Term Debt Investments: $362 70.0%
Net PP&E: $1,332 90.0%
Goodwill: $4,002 0.0%
Net Intangible Assets: $611 0.0%
Other Long-Term Assets: $504 90.0%
Investments in Equity Interests: $2,181 N/A
Total Assets: $12,230

Liabilities
Current Liabilities:
Accounts Payable: $176
Accrued Expenses & Other Current Liabilities: $1,006
Short-Term Deferred Revenue: $368
Short-Term Debt: $750
Total Current Liabilities: $2,300
Long-Term Deferred Revenue: $95
Long-Term Debt: $0
Other Long-Term Liabilities: $28
Deferred and Other Long-Term Tax Liabilities, Net: $261
Commitments and Contingincies: $0
Minority Interests: $12
Total Liabilities: $2,697

Value Available to Shareholders:

Per Share Value:
umed Recovery Liquidation Value
High Low - High

100.0% $1,438 $1,514

90.0% $341 $439
100.0% $1,003 $1,056
100.0% $172 $181
$2,954 $3,189
90.0% $253 $326
95.0% $1,198 $1,265
0.0% $0 $0
0.0% $0 $0
95.0% $454 $479
N/A $5,362 $5,362
$10,222 $10,621

$176 $176
$1,006 $1,006
$368 $368
$750 $750
$2,300 $2,300
$95 $95
$0 $0
$28 $28
$261 $261
$0 $0
$12 $12
$2,697 $2,697

ilable to Shareholders: $7,525 $7,924

$ 21.33 $ 21.33
 Valuation / Contribution Analysis Calcs.

Number Strike Price Enterprise Value: $ 21,554

Options: 180.40 $ 29.36 Balance Sheet Adjustment: $ 1,602
Convert: 36.57 $ 22.55 Equity Interests: $ 5,362
Cancel Convertible?: $ -
Implied Equity Value: $ 28,518
Shares: 1,337.17
Share Price: $ 21.33

Options: 0.00
Convert: 0.00

Valuation Summary Calculations: Sum of Parts Calculation:

$ 10,391 $ 10,424 $ 15,176 $ 32,398 $ 69,842 $ 21,554

$ 21.33 $ 21.33 $ 21.33 $ 21.33 $ 21.33 $ 21.33 $ 21.33 $ 21.33

$ 9,082 $ 10,572 $ 15,529 $ 28,411 $ 53,681 Liquidation Calculation:

$ 21.33 $ 21.33 $ 21.33 $ 21.33 $ 21.33 $ 21.33
$7,525
$ 8,483 $ 10,619 $ 15,401 $ 25,578 $ 43,902 $ 21.33 $ 21.33
$ 21.33 $ 21.33 $ 21.33 $ 21.33 $ 21.33 $ 21.33
Merger Model Scenarios - Equity Va
$ 19,809 $ 27,976 $ 37,525 $ 46,530 $ 53,061
$ 21.33 $ 21.33 $ 21.33 $ 21.33 $ 21.33 $ 21.33 $ 19.05
$ 42,882 $ 25,473
$ 19,495 $ 27,289 $ 31,040 $ 35,099 $ 43,820
$ 21.33 $ 21.33 $ 21.33 $ 21.33 $ 21.33 $ 21.33 Merger Model Scenarios - Enterprise

$ 17,990 $ 23,820 $ 26,502 $ 29,708 $ 37,106 $ 19.05

$ 21.33 $ 21.33 $ 21.33 $ 21.33 $ 21.33 $ 21.33 $ 35,168 $ 18,509

$ 5,351 $ 9,703 $ 24,126 $ 55,496 $ 68,373

$ 21.33 $ 21.33 $ 21.33 $ 21.33 $ 21.33 $ 21.33

$ 6,226 $ 10,935 $ 32,148 $ 59,015 $ 70,437

$ 21.33 $ 21.33 $ 21.33 $ 21.33 $ 21.33 $ 21.33

$ 15,169 $ 39,561 $ 61,241 $ 79,086 $ 90,633

$ 21.33 $ 21.33 $ 21.33 $ 21.33 $ 21.33 $ 21.33

$ 14,564 $ 41,264 $ 47,880 $ 72,377 $ 99,322

$ 21.33 $ 21.33 $ 21.33 $ 21.33 $ 21.33 $ 21.33
 Merger Model Calcs.

Per-Share Price: $ 31.00

Shares: 1,383.28
Implied Equity Value: $ 42,882
Balance Sheet Adjustment: ($1,602)
Equity Interests: $ 5,362
Cancel Convertible?: $ 750
Implied Enterprise Value: $ 35,168

Options: 9.54
Convert: 36.57

rts Calculation: Funds Required:

Equity Value: $ 42,882
$ 27,355 Plus: Transaction Fees: 53
$ 21.33 Plus: Financing Fees: -
Plus: Debt Refinanced: -
n Calculation: Less: Excess Cash Used: 53
Total Funds Required: $ 42,882
$7,924
$ 21.33

odel Scenarios - Equity Value Calculation:

$ 31.00 $ 31.00 $ 31.00 $ 31.00 $ 35.00

$ 42,882 $ 42,882 $ 42,882 $ 42,882 $ 49,098

odel Scenarios - Enterprise Value Calculation:

$ 31.00 $ 31.00 $ 31.00 $ 31.00 $ 35.00

$ 35,168 $ 35,168 $ 35,168 $ 35,168 $ 41,385
Buyer Assumptions - Microsoft Corporation Seller Assumptions - Yahoo! Inc.
Name: Microsoft Corporation Name:
Ticker: MSFT Ticker:
Fiscal Year Ends: 30-Jun Fiscal Year Ends:
Share Price: $ 32.20 Share Price:
Fully Diluted Shares Outstanding: 9,377.6 Fully Diluted Shares Outstanding:
Market Capitalization: $ 301,959 Market Capitalization:
Cash & Cash Equivalents: 30,489 Cash & Cash Equivalents:
Equity Investments: - Equity Investments:
Debt: - Debt:
Preferred Stock: - Preferred Stock:
Minority Interest: - Minority Interest:
Enterprise Value: $ 271,470 Enterprise Value:
Tax Rate: 30.0% Tax Rate:
Minimum Cash Balance: $ 5,000

Transaction Structure & Assumptions - Scenarios

Select Scenario: 1 Financing Fees:

Transaction Type: 1 Advisory Fees:
(1 = Stock, 0 = Asset or 338(h)(10) ) Legal & Misc. Fees:
Selected
Scenario
Scenario: 1 1 2
Per-Share Purchase Price: $ 31.00 $ 31.00 $ 31.00
Equity Purchase Price: $ 42,882 $ 42,882 $ 42,882
Implied Premium: 62.7% 62.7% 62.7%
Revenue Synergy %: 10.0% 10.0% 10.0%
Expense Synergy %: 10.0% 10.0% 10.0%
Refinanced Debt: $ - $ - $ -
Financing Fees: $ - $ - $ 143
Transaction Fees: $ 53 $ 53 $ 53
Funds Required: $ 42,882 $ 42,882 $ 43,025
% Cash: 50.0% 50.0% 33.3%
% Stock: 50.0% 50.0% 33.3%
% Debt: 0.0% 0.0% 33.3%
% Term Loan A Debt: 50.0% 50.0% 50.0%
Cash Used: $ 21,441 $ 21,441 $ 14,342
Stock Used: $ 21,441 $ 21,441 $ 14,342
Common Shares Issued: 665.86 665.86 445.39
Debt, Term Loan A: $ - $ - $ 7,171
Debt, High-Yield: $ - $ - $ 7,171
Foregone Cash Interest Rate: 4.4% 4.4% 4.4%
Term Loan A Interest Rate: L + 400 L + 400 L + 400
 High-Yield Debt Interest Rate: 11.0% 11.0% 11.0%

Sources & Uses

Sources: Uses:
Buyer Cash: $ 21,441 Equity Value of Company:
Buyer Stock Issuance: 21,441 Transaction Fees:
Term Loan A: - Capitalized Financing Fees:
High-Yield Debt: - Debt Refinanced:
Excess Cash: 53 Total Uses:
Total Sources: $ 42,934

Purchase Price Allocation & Pro-Forma Balance Sheet Adjustments

Goodwill Calculation: Fixed Asset Write-Up:

Equity Purchase Price: $ 42,882 PP&E Write-Up %:
Less: Seller Book Value: $9,600 PP&E Write-Up Amount:
Plus: Write-Off of Existing Goodwill: $4,002 Depreciation Period (Years) - Book:
Total Allocable Purchase Premium: $ 37,284 Depreciation Period (Years) - Tax:
Yearly Depreciation Expense - Book:
Less: Write-Up of PP&E: 181 Yearly Depreciation Expense - Tax:
Less: Write-Up of Intangibles: 7,457
Less: Write-Off of Existing DTL: $261 Intangible Asset Write-Up:
Plus: Write-Down of Existing DTA: - Excess Purchase Price to Allocate:
Plus: New Deferred Tax Liability: 2,291 % Allocated to Intangibles:
Total Goodwill Created: $ 31,676 Intangibles Write-Up Amount:
Amortization Period (Years) - Book:
Goodwill Period (Years) - Book: N/A Amortization Period (Years) - Tax:
Goodwill Period (Years) - Tax: 15 Yearly Amortization Expense - Book:
Yearly Goodwill Expense - Book: $ - Yearly Amortization Expense - Tax:
Yearly Goodwill Expense - Tax: $ -
New Deferred Tax Liability:
Deferred Revenue Write-Down:
Seller Deferred Revenue: $436
% Fair Value: 50.0%
Deferred Revenue Write-Down: $ 218
Write-Down Period (Years): 1
Yearly Deferred Revenue Expense: $ 218
Combined Income Statement and Transaction Adjustments ($MM)
Adjustments
FY 2009E Debit Credit FY 2009E
Combined Balance Sheets & Pro-Forma Adjustments ($MM)
Pre-Transaction Adjustments
Buyer Seller Debit Credit FY 2009E
Assets
Current Assets:
Cash and Cash Equivalents: $31,100 $828
Short-Term Investments: $13,068 $488
Accounts Receivable, Net: $13,350 $1,263
Deferred Income Taxes: $1,600 $0
Inventory: $2,333 $0
Other Current Assets: $2,393 $256
Total Current Assets: $63,844 $2,834

Capitalized Financing Fees: $0 $0

Net PP&E: $6,795 $1,814
Equity & Other Investments: $10,117 $2,181
Goodwill: $10,038 $4,002
Net Intangible Assets: $386 $295
Deferred Income Taxes: $2,874 $0
Other Long-Term Assets: $1,509 $866
Total Assets: $95,563 $11,992

Liabilities & Shareholders' Equity

Current Liabilities:
Accounts Payable: $4,468 $185
 Accrued Expenses: $2,252 $1,369
Income Taxes: $1,138 $0
Short-Term Deferred Rev.: $13,948 $436
Other: $5,829 $0
Total Current Liabilities: $27,635 $1,990

Debt Refinanced: $0 $0
Debt, Term Loan A: $0 $0
Debt, High-Yield: $0 $0
Long-Term Deferred Revenue: $2,260 $101
Other Long-Term Liabilities: $8,692 $28
Deferred Tax Liabilities: $0 $261
Minority Interests: $0 $12

Shareholders' Equity: $56,976 $9,600

Total Liabilities & SE: $95,563 $11,992

BALANCE CHECK OK! ($0) OK!

umptions - Yahoo! Inc.
Yahoo! Inc.
YHOO
31-Dec
$ 19.05
ed Shares Outstanding: 1,337.2
pitalization: $ 25,473
sh Equivalents: 2,363
5,362
750
-
12
$ 18,509
40.0%

%: Amount: Period:
1.0% $ - 5
0.1% $ 42.9 N/A
$ 10.0 N/A

3 4 5
$ 31.00 $ 31.00 $ 35.00
$ 42,882 $ 42,882 $ 49,098
62.7% 62.7% 83.7%
10.0% 10.0% 10.0%
10.0% 10.0% 10.0%
$ - $ - $ -
$ 215 $ 215 $ -
$ 53 $ 53 $ 59
$ 43,097 $ 43,097 $ 49,098
0.0% 50.0% 50.0%
50.0% 0.0% 50.0%
50.0% 50.0% 0.0%
30.0% 50.0% 50.0%
$ - $ 21,549 $ 24,549
$ 21,549 $ - $ 24,549
669.21 - 762.39
$ 6,465 $ 10,774 $ -
$ 15,084 $ 10,774 $ -
4.4% 4.4% 4.4%
L + 500 L + 600 L + 400
 12.0% 11.5% 11.0%

alue of Company: $ 42,882

53
ed Financing Fees: -
-
$ 42,934

t Write-Up:
10.0%
e-Up Amount: $ 181
on Period (Years) - Book: 8
on Period (Years) - Tax: 6
reciation Expense - Book: $ 23
reciation Expense - Tax: $ -

Asset Write-Up:
chase Price to Allocate: $ 37,284
d to Intangibles: 20.0%
Write-Up Amount: $ 7,457
on Period (Years) - Book: 5
on Period (Years) - Tax: 15
ortization Expense - Book: $ 1,491
ortization Expense - Tax: $ -

red Tax Liability: $ 2,291

 Combined Years
FY 2010E FY 2011E FY 2012E
 Combined Years
FY 2010E FY 2011E FY 2012E
OK! OK! OK!
Buyer Income Statement ($MM) - Microsoft Corporation
Historical Projected
FY 2006 FY 2007 FY 2008E FY 2009E FY 2010E

Revenue: $44,282 $51,122 $60,141 $67,702 $73,825

Revenue Growth: 11.3% 15.4% 17.6% 12.6% 9.0%
Cost of Revenue: $7,650 $10,693 $11,811 $12,934 $14,219
Gross Profit: $36,632 $40,429 $48,330 $54,768 $59,606
Gross Margin: 82.7% 79.1% 80.4% 80.9% 80.7%

Operating Expenses:
Research & Development: $6,584 $7,121 $7,893 $9,393 $10,410
% Revenue: 14.9% 13.9% 13.1% 13.9% 14.1%
Sales & Marketing: $9,818 $11,455 $12,527 $14,862 $16,266
% Revenue: 22.2% 22.4% 20.8% 22.0% 22.0%
General & Administrative: $3,758 $3,329 $3,747 $4,386 $4,843
% Revenue: 8.5% 6.5% 6.2% 6.5% 6.6%
Total Operating Expenses: $20,160 $21,905 $24,167 $28,641 $31,519

Operating Income: $16,472 $18,524 $24,163 $26,127 $28,087

Investment Income: $1,790 $1,577 $1,197 $1,652 $2,249
Pre-Tax Income: $18,262 $20,101 $25,360 $27,779 $30,336
Income Tax Provision: $5,663 $6,036 $7,608 $8,334 $9,101
Effective Income Tax Rate: 31.0% 30.0% 30.0% 30.0% 30.0%

GAAP Net Income: $12,599 $14,065 $17,752 $19,446 $21,235

Diluted Shares: 10,531 9,886 9,483 9,323 9,142
GAAP Diluted EPS: $1.20 $1.42 $1.87 $2.09 $2.32

Pro-Forma Reconciliation:
Amortization of Intangibles: $127 $236 $263 $229 $184
Stock-Based Compensation: $1,715 $1,550 $1,181 $1,215 $1,205
Pro-Forma Pre-Tax Income: $20,104 $21,887 $26,804 $29,223 $31,725
Effective Income Tax Rate: 31.0% 30.0% 30.0% 30.0% 30.0%

Pro-Forma Net Income: $13,870 $15,315 $18,763 $20,456 $22,208

Pro-Forma EPS: $1.32 $1.55 $1.98 $2.19 $2.43

Stock-Based Compensation: $1,715 $1,550 $1,181 $1,215 $1,205

% Revenue: 3.9% 3.0% 2.0% 1.8% 1.6%
Combined D&A: $903 $1,440 $1,707 $1,490 $1,291
Depreciation: $776 $1,204 $1,444 $1,261 $1,107
% Revenue: 1.8% 2.4% 2.4% 1.9% 1.5%
Amortization: $127 $236 $263 $229 $184
 EBITDA: $19,090 $21,514 $27,051 $28,832 $30,583
EBIT: $18,187 $20,074 $25,344 $27,342 $29,292

Buyer Balance Sheet ($MM) - Microsoft Corporation

Historical Projected
FY 2006 FY 2007 FY 2008E FY 2009E FY 2010E
Assets
Current Assets:
Cash and Cash Equivalents: $6,714 $6,111 $17,523 $31,100 $45,586
Short-Term Investments: $27,447 $17,300 $13,572 $13,068 $12,691
Accounts Receivable, Net: $9,316 $11,338 $12,983 $13,350 $13,007
Deferred Income Taxes: $1,940 $1,899 $1,567 $1,600 $1,607
Inventory: $1,478 $1,127 $1,495 $2,333 $3,352
Other Current Assets: $2,115 $2,393 $2,393 $2,393 $2,393
Total Current Assets: $49,010 $40,168 $49,533 $63,844 $78,636

Net PP&E: $3,044 $4,350 $5,409 $6,795 $8,308

Equity & Other Investments: $9,232 $10,117 $10,117 $10,117 $10,117
Goodwill: $3,866 $4,760 $10,220 $10,038 $9,857
Net Intangible Assets: $539 $878 $615 $386 $202
Deferred Income Taxes: $2,611 $1,389 $2,907 $2,874 $3,086
Other Long-Term Assets: $1,295 $1,509 $1,509 $1,509 $1,509
Total Assets: $69,597 $63,171 $80,310 $95,563 $111,715

Liabilities & Shareholders' Equity

Current Liabilities:
Accounts Payable: $2,909 $3,247 $3,909 $4,468 $4,872
Accrued Compensation: $1,938 $2,325 $2,077 $2,252 $2,427
Income Taxes: $1,557 $1,040 $963 $1,138 $1,313
Short-Term Deferred Revenue: $9,138 $10,779 $12,544 $13,948 $14,376
Other: $6,900 $6,363 $5,853 $5,829 $5,831
Total Current Liabilities: $22,442 $23,754 $25,346 $27,635 $28,819
Long-Term Deferred Revenue: $1,764 $1,867 $2,091 $2,260 $2,406
Other Long-Term Liabilities: $5,287 $6,453 $8,855 $8,692 $8,696

Shareholders' Equity: $40,104 $31,097 $44,018 $56,976 $71,794

Total Liabilities & Shareholders' Equity: $69,597 $63,171 $80,310 $95,563 $111,715

Buyer Cash Flow Statement ($MM) - Microsoft Corporation

Historical Projected
FY 2006 FY 2007 FY 2008E FY 2009E FY 2010E

Net Income: $12,599 $14,065 $17,752 $19,446 $21,235

Adjustments to Reconcile Net Income:
 Depreciation: $776 $1,204 $1,444 $1,261 $1,107
Amortization of Intangibles: $127 $236 $263 $229 $184
Stock-Based Compensation: $1,715 $1,550 $1,181 $1,215 $1,205
Excess Tax Benefits from SBC: ($89) ($77) $0 $0 $0
Deferred Income Taxes: $219 $421 ($1,186) $0 ($219)
Gains on Investments: ($270) ($292) $0 $0 $0
Change in Deferred Revenue: $1,724 $1,650 $1,989 $1,573 $574
Changes in Operating Assets/Liabilities:
Accounts Receivable, Net: ($2,071) ($1,764) ($1,645) ($367) $343
Other Current Assets: ($1,405) $232 ($368) ($838) ($1,019)
Other Long-Term Assets: ($49) ($435) ($5,460) $182 $181
Other Current Liabilities: ($145) ($552) ($173) $885 $756
Other Long-Term Liabilities: $1,273 $1,558 $2,402 ($163) $4
Net Cash Provided from Operations: $14,404 $17,796 $16,199 $23,423 $24,351

Cash Flow from Investing:

Capital Expenditures, Net: ($1,578) ($2,264) ($2,503) ($2,647) ($2,620)
Acquisitions, Net of Cash: ($649) ($1,150) $0 $0 $0
Purchases of Investments: ($51,117) ($36,308) ($12,314) $0 $0
Maturities of Investments: $3,877 $4,736 $800 $504 $377
Sales of Investments: $54,353 $41,451 $15,242 $0 $0
Securities Lending Payable: $3,117 ($376) $0 $0 $0
Net Cash Used from Investing: $8,003 $6,089 $1,225 ($2,143) ($2,243)

Cash Flow from Financing:

Common Stock Issued: $2,101 $6,782 $7,651 $2,400 $2,400
Common Stock Repurchased: ($19,207) ($27,575) ($9,987) ($6,000) ($6,000)
Common Stock Cash Dividends: ($3,545) ($3,805) ($3,864) ($4,102) ($4,023)
Other: $89 $54 $102 $0 $0
Net Cash Used from Financing: ($20,562) ($24,544) ($6,098) ($7,702) ($7,623)

Effect of Exchange Rates: $18 $56 $86 $0 $0

Net Change in Cash: $1,863 ($603) $11,412 $13,578 $14,485
Beginning Cash Balance: $4,851 $6,714 $6,111 $17,523 $31,100
Ending Cash Balance: $6,714 $6,111 $17,523 $31,100 $45,586

Operating Model Assumptions - Microsoft Corporation

Historical Projected
FY 2006 FY 2007 FY 2008E FY 2009E FY 2010E

Accounts Receivable % Sales: 21.0% 22.2% 21.6% 19.7% 17.6%

Accounts Receivable Days: 76.8 81.0 78.8 72.0 64.3
Inventory % COGS: 19.3% 10.5% 12.7% 18.0% 23.6%

Accounts Payable % OpEx: 14.4% 14.8% 16.2% 15.6% 15.5%

Accounts Payable Days: 52.7 54.1 59.0 56.9 56.4
Accrued Compensation % OpEx: 9.6% 10.6% 8.6% 7.9% 7.7%
Short-Term Deferred Revenue % Sales: 20.6% 21.1% 20.9% 20.6% 19.5%
Long-Term Deferred Revenue % Sales: 4.0% 3.7% 3.5% 3.3% 3.3%

Capital Expenditures % Revenue: 3.6% 4.4% 4.2% 3.9% 3.5%

Total Cash & ST Investments: $37,751 $34,161 $23,411 $31,095 $44,168 $58,277
Dividends & Interest: $1,510 $1,319 $1,197 $1,652 $2,249
Effective Interest Rate: 4.2% 4.6% 4.4% 4.4% 4.4%

Enterprise Value Calculation - Microsoft Corporation

Share Price: $32.20 Equity Value:

Common Shares: 9,306.98 Cash & Cash Equivalents:
Outstanding Options: 524.00 Equity Investments:
Exercise Price: $27.86 Debt:
Dilution: 70.63 Minority Interest:
Diluted Shares Outstanding: 9,377.61 Preferred Stock:
Enterprise Value:
Projected
FY 2011E FY 2012E

$78,993 $82,942
7.0% 5.0%
$15,214 $15,975
$63,778 $66,967
80.7% 80.7%

$11,139 $11,696
14.1% 14.1%
$17,405 $18,275
22.0% 22.0%
$5,182 $5,441
6.6% 6.6%
$33,725 $35,412

$30,053 $31,556
$2,905 $3,628
$32,958 $35,184
$9,887 $10,555
30.0% 30.0%

$23,071 $24,629
9,142 9,142
$2.52 $2.69

$111 $91
$1,289 $1,354
$34,358 $36,629
30.0% 30.0%

$24,051 $25,640
$2.63 $2.80

$1,289 $1,354
1.6% 1.6%
$1,295 $1,335
$1,184 $1,244
1.5% 1.5%
$111 $91
 $32,638 $34,244
$31,342 $32,910

Projected
FY 2011E FY 2012E

$61,355 $78,519
$12,691 $12,691
$13,917 $14,613
$1,607 $1,607
$3,587 $3,766
$2,393 $2,393
$95,550 $113,589

$9,927 $11,627
$10,117 $10,117
$9,857 $9,857
$91 $0
$3,086 $3,086
$1,509 $1,509
$130,137 $149,785

$5,213 $5,474
$2,597 $2,727
$1,313 $1,313
$15,382 $16,151
$5,831 $5,831
$30,336 $31,496
$2,574 $2,703
$8,696 $8,696

$88,531 $106,890

$130,137 $149,785

Projected
FY 2011E FY 2012E

$23,071 $24,629
 $1,184 $1,244
$111 $91
$1,289 $1,354
$0 $0
$0 $0
$0 $0
$1,175 $898

($910) ($696)
($235) ($179)
$0 $0
$511 $390
$0 $0
$26,196 $27,730

($2,803) ($2,944)
$0 $0
$0 $0
$0 $0
$0 $0
$0 $0
($2,803) ($2,944)

$2,400 $2,400
($6,000) ($6,000)
($4,023) ($4,023)
$0 $0
($7,623) ($7,623)

$0 $0
$15,770 $17,164
$45,586 $61,355
$61,355 $78,519

Projected
FY 2011E FY 2012E

17.6% 17.6%
64.3 64.3
23.6% 23.6%

15.5% 15.5%
 56.4 56.4
7.7% 7.7%
19.5% 19.5%
3.3% 3.3%

3.5% 3.5%

$74,046 $91,210
$2,905 $3,628
4.4% 4.4%

$301,959
$30,489
$0
$0
$0
$0
$271,470