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Executives

Ken Goldman - Chief Financial Officer

Analysts

Stephen Ju - Credit Suisse

Yahoo! Inc. (YHOO) Credit Suisse Technology Conference Call December 4, 2013 3:15 PM ET

Stephen Ju - Credit Suisse

Alright. So I think we are going to go ahead and get started. I am Stephen Ju with the Credit Suisse internet equity research team. We are joined by Ken Goldman, CFO of Yahoo! So without much further ado, let’s get started. So Ken, you have been at Yahoo! for over a year now, so how do you feel about the progress the company has made to-date? And what are some of the encouraging signs that you have seen? And what are the areas of focus now?

Ken Goldman

Yes. And just before I start, let me do my little disclaimer that I may, I will try to keep that actually from saying too many forward-looking statements, but I may say forward-looking statements as I would ask everyone to refer to the risk factors in our various public filings, 10-Qs and 10-K and so forth. Yes, it’s amazing how time just fly in terms of the past year. Many of us started – well, let me just go back which Marissa started in July ‘12 and several of us came on board during the second half of last year. I did not know Marissa, I was referred in by a mutual friend and he has been – it’s hard to explain how much has changed. The good news is the core Yahoo! was there. The engagement was there. On the products, even though we had let them atrophy so to speak were there, but the company has been really fundamentally reengaged, re-enthused. We brought on a number of new folks. The team now I would argue is working very well together. We are working very well with the board that as you know has not always been the case at Yahoo! and Marissa has been phenomenal in terms of number of changes that she has made.

We have a rigorous employee review system. We have a rigorous goal setting system. We have various communication devices such as an all hands meeting every Friday and late afternoon, which people told her, no one would ever show up and it’s standing room only, it’s late afternoon when we have those meetings. Things that you would think are simple in a company, in a company that has been around for 18 years you would have, but we didn’t have a very rigorous approval matrix. That’s sort of bread and butter for me. So we spent a lot of time making sure we have a very rigorous approval matrix. And we did things to really be much more internet centric in terms of employees whether it’s everyone has the latest phones, laptops, tablets, food and all that good stuff.

The thing that surprised me is we really didn’t have a business rhythm like I like to have. In other words, normal meetings reviewing the metrics, the business, the revenue, we didn’t have a lot of the operational meetings. We spent much of late last year and really much of early this year getting our metrics in place. So we really now understand the drivers of the business, the revenue drivers and so we have consistency in terms of how we look at that whether its understanding that we now see very well daily revenue and all the different components. We see the core metrics in terms of clicks, pricing and so forth, ads sold, sell-through rate, all these things that we now can see, we see how much is booked for the quarter as we know how we stand at any point in time, how we booked this quarter as vis-à-vis prior quarter. So we have a bunch of data that we now use to run the business that honestly didn’t exist before. So that has been sort of the blocking and tackling is where lot of this year was predicated on.

And then the other thing I would say is Marissa really went about, once we got the teams in place to really reengineer the products if you will. And so I think about 15, at least 15 of our products have been totally updated from things like mail to sports, finance, homepage and so forth because many cases hadn’t been updated for a number of years, so all of that had to be done. And so as I think about where we are today, we are feeling very, very good about that. A year ago, we had no mobile activity. It’s hard to believe that. We had no mobile activity. It’s the biggest tectonic shift that any of us will have gone through in the internet. We now have that. So that’s looking much more a great progress there. So with all of that as we think about now going into ‘14 we think we feel very, very well positioned. And I know I have related questions there, but I just want to give an overview there.

Stephen Ju - Credit Suisse

Got you. So you brought up the mobile strategy, so the mobile engineering talent acquisition is definitely very easy to understand, but can you help us stitch together the acquisitions to-date and how they helped your engagement in product development. And Marissa brought up I think when she first got there the daily habits you wake up, you look at the news, you look at the whether, so where else does Yahoo! need to be in order to increase its share of the consumer’s time?

Ken Goldman

I think the – we have the core there and so whether it’s news I happen to like sports, finance many of you in this room whether mail, though there is various entertainment products which you may not wake up early in the morning but serve as a daily habit. We think games, is an area of interest. So there are a number of things that we already had, but honestly had not been - two things. Either they had not been upgraded for long time or hadn’t been repurposed for the mobile side, so both of those have been done. And so today when we go into where we are today to go into ’15 we now look at products that have been upgraded much more viewed for today’s world, repurposed if you will for mobile. So mobile whether its smartphone or tablet it’s very, very important and that’s where our page – that’s where the growth of our page views are coming, so all of that is there.

The way we have added several other people in mobile by and large many of those people have come through our acquisitions. We have done something like 25 acquisitions roughly in the last year. The bulk of those are in the mobile space is one of the things we have to do bootstrap our way up to get into mobile. We didn’t have a team in place. We just didn’t have teams in place a year ago. We are now there again I think as we get into ’14 we will provide more metrics on our mobile and both in terms of engagement and revenue and so forth .But suffice it to say we get a very, very good growth in mobile and the increase in our pages is primarily coming from the mobile side where we are trying to hold these desktops relatively flattish to it may go down a bit in desktop, but frankly all the growth is going to come from the mobile side.

Stephen Ju - Credit Suisse

So we are going to keep this interactive. So we will open it up to the floor for questions at any given time. So while we are pulling for question now I have got another one here. So I am curious about your online video strategy since this is one segment of display that’s seeing a real shortage of available inventory right now. So what are you going to be doing to help the brand advertisers, move their TV dollars online?

Ken Goldman

That’s a good question because that has been one of the challenges we have. And frankly there are certain things, that I would say very straight is still work in progress for our company. Video is one again I feel a lot better. We are a lot further along on mobile and we can look at the trends in mobile and feel very good about our position for ’14, ’15. Video, we have work to do still. We have done various things in terms of alignment with NBC Sports, ABC News, SNL, Comedy Central, CNBC and so forth. We have done a variety of things there. We have some of our own programs as well that we use on screen. But I think to get more direct content, more must-see content is very important to us. We are going to work on that. We believe in that.

We brought on Katie Couric obviously is very well known news caster. We think she can do some things that are very unique for us in term of creating content for us specifically, exclusive content that you would come to Yahoo! to see. We did a little while ago we hosted four rock concerts if you will. Again, another way you come see us. So we are trying to do a lot of things that this brings people in. We will have obviously we have a relationship with NBC Sports for the Olympics coming in I think February. So there are things of that nature that will bring people in.

I don’t want to say must see, but things that really draw people in, that’s the focus is going to be. Well, I try to like – people always ask the question how are you different and why would people – what is Yahoo! versus others. We do have what I call – what we call you just see in the industry user generated content. So a lot of it clearly mail is of that sort and so forth which is clearly where we have much of our viewership comes from if you will. But on the other hand we are unique from the other and that we have the homepage in news. We have our own sports. We have weather. We have finance. So we have a lot of things that content that people come to daily that you wouldn’t get it from Twitter or Facebook and again so we will look at that as just like maybe competing for time spent, but competing really for different kinds of content than we would have at Yahoo! So that’s what we have been known for. People come to our homepage, they see News, going from there see maybe Sports, the Finance, Weather, obviously Mail, all of the things are very, very important and videos and screen and some of the unique content we have, that’s what people want to come to Yahoo! for.

Stephen Ju - Credit Suisse

Got you. Are there any other specific tactical areas that you feel you should want to highlight for investment? And of course carried in this question is your view on capital allocation and what you feel is the optimal level of cash for Yahoo! especially in light of the recent convert deal?

Ken Goldman

Let me – I will answer that question I know I saw some hands out. And so I always like to keep this free-flowing and interactive and again see what’s on your folks’ mind, but yes, I think the – obviously, I was very pleased with the ability to raise some money what I proceed is very, very attractive rates. For those who know me, I am – historically I have not been a big fan of converse per se, but I just felt that the timing was right, the terms were very good. It was a way for us to raise the money at very, very – what I felt was very attractive rates. And to buttress that with our announcement of big buyback again, I think the world has evolved in technology. There is a period of time when – I have been doing this for long time where we always want to have more and more cash even if it didn’t necessarily have a direct purpose. I think today having proper capital allocation is an important element of running any company and certainly in our space. I know the board feels that way, I feel that way, management feels that way. So we think long and hard about how to have the right capital allocation, given we do want to have a strong balance sheet. So there is a level of cash. The fact that said roughly $3 billion, I don’t have that exact right number, but roughly $3 billion is the number we feel good about having on our balance sheet to show strength, exhibit strength.

On the other hand, we have bought back over the last couple – around two years, about 250 million shares, not quite 25% of our capital structure. So today, we have a little over billion shares outstanding. We had well over 1.2 billion about two years ago. So capital allocation and doing that well is very important to us, we think about that. And it’s one of my jobs in terms of working with the board and how best to. In the past, how best to apportion the money from Alibaba, but also how best to think about free cash flow and how to use free cash flow. And there is various ways to do it. One of which is to be thoughtful in terms of buying back stock in which we are.

Another one is to use some of that for generally modest size acquisitions, which we will think about capital spending. So if you think about free cash flow, there is obviously EBITDA, which drives it. There is two other things that are important. One is cash for capital expenditures and then tax – cash for taxes and we spend a lot of time in both of those. So capital spending, if you look at our capital expenditures down about 40% from what it was last year. It’s pretty much a low for the last several years. And so we have much more rigorous approaches to how we spend capital. We have very rigorous approach to how we think about tax planning, how we spend not only the rate, but how we spend cash for taxes. So I think we are doing all of the things you would want as investors for us to do, you think about how to properly use our cash.

Stephen Ju - Credit Suisse

Over the past two quarters, I have noticed you guys have had a pretty sizable increase in terms of the amount of clicks coming through your web pages. Given that you guys are an ad company at the end of the day, how long like how much of a lag is there between click-throughs continuing to increase and where you actually do gain some pricing power in the market?

Ken Goldman

Yes, the question, so as we think about over time, clearly the fact that our click-throughs have been up high-teens 20%, 21%, year-over-year is good. Pricing has been down a smidge if you will. As we think about planning, we clearly would like to see – we would like to see ourselves do better on pricing. So that is a real important element to how we think about the future and pricing by the way really across the boards. And so as we get a better handle on our inventory, better handle on our ability to sell, add more advertisers think about premium advertising and premium spots versus programmatic if you will. We think about that relative to both search, display and especially mobile. We think as we think about next year as more and more of our growth will clearly come from mobile, how do we think about the ads sold there, how do we think about native ads and how do we think about pricing for that. That is going to be a focus for us in ‘14.

Stephen Ju - Credit Suisse

Can you talk about the philosophy behind the hiring of Katie Couric and what’s view is in competing directly with traditional media and whether there is any kind of evidence to support that you could do that or how this decision was made?

Ken Goldman

Yes, I think the question about Katie Couric we will see. It’s just without giving numbers is the modest-sized bet for us that we think the more we have unique exclusive content that drives people to our site that can’t get otherwise we think is important. It does – so there is one element of a halo effect and more important element of the content, the pages and the monetization they are on. We think whether its Katie, having Megan Liberman do some of the be the editor at large, having David Pogue on the technology side and others of that sort where we can have content you can’t get otherwise. We are looking for other opportunities by the way.

We think that’s the way to draw people to our sites and as you buy from data we had now more people go on to the net than watching TV. We think that’s we and by the way Katie think because she has been very public about this think that’s the wave of the future. I don’t think is necessarily where it means TV has to go down for us to win per se. But we do Yahoo! has always stood for our unique content having our own access. So we will combine things like Katie if you will to using Associate Press which we have. So we will have a lot of informational sources. We use Routers for finance and a bunch of other sites, information sites. So we are going to use – we want to be comprehensive so you can go people who come to our site they can get everything they want without having – without forcing them to go somewhere else. So that’s – that is going to be one of the things we continue to do and frankly it’s going to evolve. It’s going to evolve over time.

Stephen Ju - Credit Suisse

So I will have another one here. So I mean going back to the capital allocation question, I mean you have pretty significant M&A activity in 2013. I think you mentioned about 25 companies you acquired, so what does the New Year hold for you and how does your criteria for acquisition change next year if at all?

Ken Goldman

I think there is a variety of things at least I think of. One is my sense is we will continue to be aggressive, but maybe a little less number in terms of what we call (indiscernible). It was a unique situation that occurred in ’13 where we came in we have recognized we were behind if you will in the mobile in terms of having technology we need and frankly some other areas that we need to have technology even in our mail area. So we made some acquisitions of folks to really bootstrap our technology and our capabilities. I think we are well along the way there, so I don’t want to say we are going to stop because I am not saying that but I think that will slowdown in terms of some of those that we just had to do if you will to get us in the position we are now that given where we were about a year ago.

I think in terms of larger ones we did look at some things internationally. I think the challenge for us internationally is we are sub-scale. We want to go long and hard and supply around 5-ish countries in Europe, so we have to drive that hard. But frankly Europe now is if you look at our numbers is less than 10% of our business. It needs to be – prior than that our whole international business was 25% roughly in Q3. We need to grow that something that we can do organically but we are going to have to think about inorganically as well. I have always liked the term of revenue growth accretive and so I would like to find acquisitions that for a good price if you will allow us to grow accretively.

We are all about growing, unfortunately this you if you look at it historically it has been flat as you can get not where we would have liked. I’ll just say that I mean we certainly went into the year with a little bit better expectations than we have achieved in the first three quarters. And so as we think about finishing this year and ’14 clearly all of our sites are on revenue and growing in the top line, that’s all of the sites to do that is going to be on the mobile side. The other thing and relative to international, we do spend frankly, we had to get our house in order domestically first. We are very confident we made great strides there and now we want to take that capability and transition that to the international. So we have put lot more emphasis on the international. So you will see that as we go forward here into ‘014. So I just honestly feel so much better today. I mean, you come in as some of us were new, some of us are already there, you go through a budgeting process in ‘13 frankly you don’t know what you don’t know. We have had a sense for what works, what frankly didn’t work as well as we would have liked. And so we have a much better ability to plan. We know the metrics. We have put the metrics in place. So I think we go into ‘14 in much, much better position from a product point of view, from business case point of view, rhythm point of view and how to really drive the business.

Stephen Ju - Credit Suisse

Yes. You talked about putting systems in place to get better data on inventory and pricing. Can you talk about what are you doing to get better data on your uses in order to improve targeting those advertisers?

Ken Goldman

So your question is, what are we doing better on users and targeting?

Stephen Ju - Credit Suisse

You are getting better data around the users and then monetizing that?

Ken Goldman

Yes, I think actually there we have had good data in general. I think, we haven’t always acted on the data as much as we could have from what I can see. And so we are doing lot more of that today. So we are targeting – we are doing it across frankly all of the platforms and I already talked about was desktop and being able to by the way to sell across the platform to sell across. Another way of thinking about it is we now look at a homepage is a big part of what you sell and knowing exactly go into a quarter what’s been sold, what hasn’t been sold, who would want to buy on a Thursday, for example, because they have movie permits going on Friday and Saturday. So you want to sell that much better in terms of focusing on this past weekend and who want the advertiser in that. So we have a much better feel for A, our users targeting them, knowing the advertisers, knowing the ones that should that. And so we have that much more focus all the way up from the sales infrastructure, all the way up to frankly, Marissa and Henrique and so forth. So that is in place. That may have been done at a lower level a year ago, but we certainly didn’t have the visibility at senior team on those kinds of things I just mentioned that we do have today. So as we go into a period, we know exactly what’s been sold, what hasn’t been sold, what days are open, what days aren’t open, what days we should sell it to X, Y, Z, because this happens to be a data they want to. It’s a good day for them to go to sell sales. We will have the Olympics coming up, how do we think about that relative to car companies or anybody else much better capability today that maybe it might have existed one-time, I really don’t know, I don’t know the history. It certainly wasn’t prevalent as best we could tell when many of us came in a year ago.

Stephen Ju - Credit Suisse

Got it. So look and feel about your verticals, including the homepage on some of the other sites, have gone to the endless feed format and do you feel like you have to reeducate all of your advertisers to work with a new format or have others kind of paved the path in terms of selling advertisers on the new format?

Ken Goldman

Yes, that’s an interesting perspective, because I would just say, I would say a little differently clearly as we have changed some ad format, changed some of the products, we actually in some cases eliminated some spots where we had ads before, because they were very, I don’t know great, but they created a lot of friction with our users in terms of how they got into our sites. We had some cases where you couldn’t get into your Mail at all without seeing an ad first. So we have done some things, which you could argue may have been near term not helpful, but long-term, it does help our engagement. Sometimes, you bring on new products. It is on new formats. The advertisers have to get used to it. So we have had probably a little bit more of that this year that we may have in the future. I think that’s primarily behind us. And again, we have done so much so fast and then bring everyone along has been some work if you will. But I think as we go on, I think my sense is there will be the change is going at least for a while will be more evolutionary than some of the changes that were more revolutionary this past year, as we just had to go, make things happen very, very quickly. Because again some of these products from what I see internally hadn’t been updated 3, 4 in some cases believe or not 8, 9 years. Groups is one product that hadn’t been updated in 8, 9 years. So lot of products that we were more of a media sort of oriented company I guess. We let the development side and products side which is hard technology wither if you will the number of engineers we had in the company, number of PhDs had withered or declined until we actually got rid of them. So we changed the course of that and my sense is that is probably 80%, 90% behind us in terms of getting where we want to be and now it’s more evolutionary going forward.

Stephen Ju - Credit Suisse

So it seems like the products are in place from how do you feel about your display business overall in getting that back to growth trajectory?

Ken Goldman

Well, I think the – as we think about it – as we go through our planning now for next year I mean we are very focused there, I mean we have pricing going down now I mean do we want – so we wanted – we like to see and again I am not giving an forecast there. We definitely would like to see pricing improve, so we are going to be focused on things like the ads sold, sell through rates, pricing ad formats. We are going to be looking at growth and frankly try to make improvements along all of those metrics. We clearly know it’s going to be hard to grow pages in the PC desktop as we know, I mean you know the numbers just like I know the numbers in terms of PCs sold and so forth. So the real growth and we are looking – we are going to be focused on real growth. We are seeing great growth in mobile. Again we are looking for continuation of those trends in mobile that’s where all the things I just said, so where there is native ad formats whether it’s a better sell through rate, we think pricing has a long way to go to be improved. We have focus in all those things that’s where we see growth coming in ’14.

Stephen Ju - Credit Suisse

Theoretically the native ad formats should be performing equally as well in whichever the modality or consumer access whether it’s desktop, mobile or tablet, so over the longer term how do you think these – that format will perform?

Ken Goldman

We think it’s going to perform quite well. I mean it’s such an – I don’t want to say natural because it’s a play of words but it is a natural, it’s less obtrusive for the user. We see much better click – we generally see better click-through rates. It’s just as a greater format again you don’t see these big display ads in the right or left just sort of blaring at you. And I hate to admit it, but I actually see these ads when I am coming up with – driving my Tesla. So I can watch easily it’s just much, it’s just A, more readable an less obtrusive much more interesting and so work in the ads – working ads is very, very important. The dynamics of ads, the kind of ads, the formatting of ads it’s a science in and itself beyond the content. So yes we are very, very focused on that.

Stephen Ju - Credit Suisse

Okay, switching a little bit to the search side for a second here. So that’s on pretty steady growth over the past year, is there still more opportunity or room for growth in the coming year?

Ken Goldman

Yes, I think in the search side the things we have to do there it’s like again I am sounding a little bit broken record here. But we can continue to do things on the desktop side. Particularly we think on the pricing side. But honestly it’s like everything else. I think the two areas in this case is going to be mobile. And down the road we have work to do but down the road on Tumblr that’s an area where we think there is a big opportunity for search as well as display for that matter. So we do need to work with Tumblr to monetize that those pages and so forth. But again I think in the mobile side and then international we basically treading water – as I said before treading water internationally we need to grow international. We need to see greater pages pricing there as well.

Stephen Ju - Credit Suisse

Okay, got you. So you have been spending a lot of time shoring up your U.S. operations and you brought up your international operations. So I mean what’s the time when Yahoo! had a pretty wider footprint in terms of geography. So what’s going to be your – that was probably before you got there. Yes, it’s been a while, but…?

Ken Goldman

I guess I have missed that.

Stephen Ju - Credit Suisse

You may some how but yes, so what’s going to be your go to market strategy for international how is that going to be dealt?

Ken Goldman

Again I think the – what we have done is as we have updated the products this year they were primarily U.S. centric. So we are going to take a lot of those capabilities and now which we hadn’t done up until now transition those or transfer those to international. We are going to spend more time on driving content, acquiring content internationally. Again we can’t be all things to all people, so we are going to initially focus on the five or so core countries in Europe, several core countries in Asia-Pacific. Again, I think the things we can do even further with Yahoo! Japan and think about how to leverage that. We are very strong in areas like Taiwan and Hong Kong put more emphasis there. The countries in Europe and again I think there we have sort of just start somewhere and show some incremental improvement. The other thing is I mentioned before we will look at somebody said there maybe opportunistic acquisitions, but we will be in lookout, in our lookout for acquisitions, because some of this to get to the level from the level we are now to a more meaningful presence in Europe in particular, we are going to have to do some things that are not just more of the same.

Stephen Ju - Credit Suisse

Understood. So I mean, you mentioned Tumblr earlier, so we haven’t heard from that team a little while, but I mean, how is that integration progressing and are there specific areas we can see a lot of potential for monetization?

Ken Goldman

Yes. We haven’t updated the metrics on the ones you can see on their site. So we will start updating some of that data as the year goes – as this year finishes up and as we go into ‘14, but the engagement has been good. The growth there is good. We are at a transition now of focusing more and more on the revenue side of that equation. That hadn’t been the case before we acquired the company and they get into that transition both on display side as well as the search side. And we have a very good rapport with David Karp and his team. So it’s a question of yes, we are leaving them to run it independently, but they are part of our company. So we are working to make sure we get leverage in synergies between what Tumblr is doing and what we are doing here. So I think that’s going to continue to evolve and we will continue to see more success there, if you will. And we do expect those revenues to be meaningful to us next year and certainly more meaningful as the years go on. So there is nothing I would say today that says we don’t feel very, very good about where we are in Tumblr. Does take work, it’s not easy to take a site, which basically has had no monetization to transition to monetizing and figure out how to do that in a way that does not obstruct users, does not infringe on how they think about their site and so forth. So you have to be careful to do that in a way that again is constructive and positive for both the medium and longer term which is what, so that’s how we think about working with them.

Stephen Ju - Credit Suisse

Yes. So I mean that begs the question of native ads for me at least in my head once again, I mean, it’s mostly text-based right now, there are some pictures interspersed in with the native ads. So is there a potential especially in a case like Tumblr to show pictures or even video in some cases?

Ken Goldman

There might be. Again, this is all areas that we have worked with them on. And so it’s still little early there. We are in sort of the planning stages now with them. So yet I think all of those things are opportunities. David Karp has such a nat sense of what works and what might not work with his strong user base. And so we are working with him in a way to make that work. And so again, where you continue the great engagement and then you frankly add to the site as opposed to detract them a site. That’s the nuance you really want on a lot of your things is where ads really help create the user experience as opposed to detract from the user experience.

Stephen Ju - Credit Suisse

Got it. So you have done a number of acquisitions, buttressed your mobile business and you have also significantly made some investments into mobile as well. So I mean, when do you think these investments will turn into significant financial returns for the company?

Ken Goldman

Well, I certainly hope soon. No, I mean, we are – our heads if you will, if you sort of say you think about how you run a company, you think about the things you have to work on that. We were extremely internally focused on ‘13 to get our act together, if you will, both in terms of some of the things I already talked about in terms of getting the business rhythm. And the traction of people, the management of employees, getting the products figuring out what products had to be, getting the organization in place, figuring out what products had to be updated, when they had to be updated, getting all of that process didn’t quite exist. Again, I think by and large that work, I don’t say it’s done, because we obviously keep on doing that, but at least the jumpstart there is behind us. And so now again, I can’t overemphasize that we are now very, very focused on the top line growing the revenue, growing GAAP, I mean, we have been focused on ex-TAC revenue probably because when we transition to Microsoft search, there is no TAC involved, where they used to be TAC involved when we had Yahoo! search. And so certainly the TAC was going down. So to look at ex-TAC was more representative of where the business was going GAAP revenue. We will be now looking more to GAAP revenue because that’s now more synonymous with the real business as well as ex-TAC. So we are going to be looking at the true top line the GAAP revenue, we are very focused on that. How we do it, what kind of deals we do affiliates outside the network, inside the network through trading fits and so forth. Our global ad network, we are going to look at all of that and so some of them may have revenue share whatever again we want to I have said before increase the throw weight of the total Yahoo! So we are going to be very, very focused on that top line business. And then over time how does that translate into greater operating profit, EBITDA and cash flow.

Stephen Ju - Credit Suisse

Yes, I mean what are positive impacts that Marissa exerted on the company was its ability to go out and hire against some very strong competition. So what is your outlook in terms of heading into 2014 in terms of your ability to continue to hire and get the talent that you need to continue to drive the business?

Ken Goldman

Yes I mean, we have said we have thousands and thousands of unsolicited resumes, but it’s interesting in the old days if a company had a equal offers from Yahoo! and X, Y, Z they would go with that would go – almost always X, Y, Z. Today if we have equal offers more likely than not they will come to us. And so we find people who want to come. They have recognized we still have lot of work to do, but they want to get on. They like the challenge, like the kind of products we are doing, they like the team we have in place starting with Marissa on down. They like the fact that it’s frankly been no controversy with the company. That was the case couple of years ago. So we are having really I don’t want to say no challenge in hiring because competition for talent is pretty extreme in internet space. By having saying that we are doing quite well in attracting folks that want to come here. We have done very well as we acquired companies keeping those folks which is obviously a key sign. We have done very well attracting new people to the company, our attrition is down. So these kind of things have improved markedly over the last year. We do engagement surveys, I don’t want to go to exact numbers, but the engagement surveys, employee satisfaction was up dramatically year-over-year as well. So the things that we see as a team in terms of the likability of working at Yahoo! much, much higher today than it certainly was a year ago when many of us came.

Stephen Ju - Credit Suisse

Understood, so I mean I think you mentioned games as a product area earlier. You are seeing a lot of the other large internet operators with lots of traffic turn to that vertical as a lead generator to and monetize that way I mean Yahoo! traditionally have had a gaming site but there hasn’t been much in the way of activity. So is there going to be a focus at least in the near to mid-term in terms of becoming a lead sports source for that vertical?

Ken Goldman

I don’t want to get too far there, but we did acquire a small company in games as well. We think of generic games whether it is Bingo, Scrabble and things like that, so we are not going to compete with some of the gaming companies you might think of, so that’s not our space. Our space is more of what are the sort of the daily kinds of games that people would use. You might be on a plane, you want to play a game with yourself Poker, Scrabble whatever. Those are kinds of games we want to have in our site that we work on that people use day in, day out as opposed to some of the digital games you have all heard of. So that’s the space, so the generic games are games that last year and year and year as opposed to the one-hit wonders that’s not the space that we are in. I mean I am not saying we might not do something with someone down the road in which we partner with someone whatever, but we are going to be inventing, I don’t see that certainly today. And we are not going to be inventing those kind of games. We are much more in the generic kind of games that people have used for years and years and years.

Stephen Ju - Credit Suisse

Understood so I think probably one of the last things – one of the last issues that I want to kind of focus on was I mean how are you thinking about your investments in Asia. I know we had a presentation earlier today and especially also with Yahoo! Japan.

Ken Goldman

I think of it in several ways. One is sort of flippant comment. I mean we have two very strongly appreciating assets which has been helpful for the company in terms of the company stock price clearly. Yahoo! Japan is up 78% year-over-year in terms of its price, Alibaba whatever valuation you want uses up several times fold from where it was a year ago. So those have been appreciating assets. And I would like participating and appreciating assets. In the case of Yahoo! Japan is things we think we can do strategically with them. We are doing more than ever with strategically in terms of our respective businesses. So we think there is more to do there. I like being involved with them. They certainly have our name. So we think there is more we can do with them. This stock doesn’t trade very much. So we like the fact that we own 35%. And we get nice between royalties and their equity earnings and so forth, it’s been very attractive for us.

In the case of Alibaba, again, that’s been beyond anyone’s expectations. You heard Joe and many of you probably heard Joe today, they have just done phenomenal. They have exceeded any – expectation anyone has had for them. Our relationship with them, maybe if you take one thing out of this meeting, our relationship with them has never been better, very, very cordial. We work with them very well. It’s dramatically different than it was couple of years ago. So again, that’s a great relationship. We are glad to be partners and investors and shareholders with them. I give Jerry Yang a lot of credit. He invested in both Yahoo! Japan and Alibaba and those multi, multi, multi-fold, they would rank up with any good venture investment that anyone would have made ever in the world of equity investing, the venture investing. So hands off or not hands off, hats off to the team there for that. And so right now, that’s what we are working on. I hope we can find over time great ways to utilize the Alibaba proceeds at such time as they go public. I hope you don’t have to pay a lot of taxes. We are still working on that. So we are very active on that. We did announce as I talked about $5 billion buyback. So we do think our stock continues to be, is a good investment and well, that will be one of the ways that we do provide cash back to our investors.

Stephen Ju - Credit Suisse

With that, we are out of time. Thanks very much.

Ken Goldman

Thank you.

Question-and-Answer Session

[No Q&A session for this event]

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