Yahoo! (YHOO) Management Presents at Drexel Hamilton Telecom, Media and Technology Conference Call Transcript

| About: Yahoo! Inc. (YHOO)

Yahoo! Inc. (NASDAQ:YHOO)

Drexel Hamilton Telecom, Media and Technology Conference Call

September 03, 2014, 09:40 AM ET

Executives

Ken Goldman - CFO

Analysts

Unidentified Analyst

Well, good morning everyone. Thank you much for your kind attendance. We are very grateful on behalf of Drexel Hamilton to have you here at our tech conference and it’s my distinct pleasure to introduce our next speaker, who needs really no introduction, but Ken Goldman, Chief Financial Officer of Yahoo! and I am a semiconductor analyst here at Drexel Hamilton. I don't cover Yahoo! I really don’t know anything about the company other than what you all read and so I am going to try to keep an extremely little profile but Ken and I go back to his semiconductor era in the 1980s and he was kind enough to come over and spend a little time with us.

And we're going to keep this very informal question-and-answer and don't hesitate to jump in and dominate this, and if you don't I've got a few questions for Ken. And I would like to turn the rostrum over to Ken Goldman.

Ken Goldman

Yeah, let me make a few brief comments first. I guess I’ll do that. Actually [inaudible] has come in yesterday and had a little trouble getting out of [inaudible], but anyway good morning, welcome. Just this will be a bit of a disclaimer here. I may talk about forward-looking statements to the extent that our financial and operational performance is different, whatever. Please refer to risk factors in our various public filings including our 10-Q and 10-K.

So I want to give you a background here, a little bit. I happen to -- I am an old semi guy, worked [inaudible] all in semi. I started my career in semiconductors, and the guy I think is to my left, he was as very irascible then as he is now in terms of covering companies. He learned the word sell before it became fashionable and I happen to see him, was an article in the Wall Street Journal about some company he was crapping about, so to speak and I said hey, [inaudible] with that guy.

So I said yeah, I looked him up, found him and when we met out our way and I said -- he said hey we are having a conference and I said hey, I am back here and love to do it because honestly my roots do go back to semi-conductors. I have a lot of respect for the industry, for the people that cover it, for Rick as well in particular because he does say what he thinks and he is one of the few that’s really stuck with it and he does his homework and he doesn’t just go with everyone else in terms of the conventional wisdom.

It is a little ironic to have the presentation here as I walked inside and go through the various pickets and I tried to hear and I guess they are talking about technology and eliminating them and you know you can’t be in any of the fields that we have spent our careers and know that technology is inexorable. You can’t protect jobs because of -- stopping technology just doesn’t work. Ultimately technology will overrun those kinds of jobs. You always have to find the next type of jobs that you can go into where you add value and I certainly always go through that with folks that I mentor, my kids and how I think about what I do and what I think the world is going to.

The last thing I would say before I go into a couple of comments the -- I did come to this -- I don’t know a lot about Drexel Hamilton. Rick explained to me how it is a number, I guess [Pace] I remember correctly is involved here. He is on a board -- he has been on the board with me and I have a tremendous amount -- even though I wasn’t in the service directly, my father was, but I have a tremendous amount of respect for those folks. And so when Rick explained a little bit to me the background of the organization, the firm, I said that’s another good reason for me to attend.

So I thought I would just start there and so I am happy to be here. Joon, who heads up our Investor Relations Department is also here with me. I could go through some general comments. I don’t know honestly how much people know about Yahoo! I did come to the company about -- and Rick’s going to ask me some questions, but I did come to the company, a little over, now actually not quite two years ago. Marissa came in. She was brought in by -- effectively a new Board who was looking to basically re-establish the excellence of the company. We had been through some turmoil, both at the managerial level as well as the Board level. So I was brought in to really frankly get back to basics; back to basics meaning focus on the products and properties, user engagement and bring out products that our users like and appreciate. We had gotten away from that for a while.

It is an iconic, [Icahn’s] an iconic brand when Marissa called and she asked if I would be interested. She had gotten my name from some folks she knew basically in the banking industry and some other on the Board and so I was tickled pink frankly to come back to the Internet. I had worked with an Internet company called [inaudible] backed in the late 90’s and you know it is clearly an iconic brand. It’s a great company, great people. We do create, in my opinion, some great products, products that people use every day. There is a lot of sometimes noise around us.

Again I don’t know how much folks know, we are about a $4.5 billion company roughly in revenue size. To give you sense our EBITDA is roughly $1.5 billion and again I am not giving any guidance or anything else here. But to just give you sense we had $4.3 billion in cash at the end of Q2. We do have a significant stake in Alibaba which gets a lot of attention. We have been from a capital allocation point of view we’ve been giving -- repurchasing a lot of our shares, giving cash back to our shareholders, returned something close to $7 billion. Over the last 2.5 years reduced our share count about 20%, generated free cash flow in Q2 of about $186 million. We have great financial flexibility because of the balance sheet. Obviously at some point Alibaba will go public. We will sell about 140 million shares in the IPO, that's all public. The [return meaning] we will be locked up for a period of time.

In terms of where we are from a product -- from a company point of view, we came in with the approach that we had to work a lot on the culture. There is number of things which if we go in Q&A we’ll cover that we went through to, basically re-up the culture, to get to back to a place that people wanted to come and work for. We had gotten away from that. As a point of view where we had before Marissa came on there was pretty high attrition. We had a hard time acquiring companies because folks did not want to come to work for Yahoo! that's all changed. So we have been on a hiring binge relative to development and engineering, some of that organically or some of that through small hiring of companies, small companies.

So we have been focused on that, although our headcounts been roughly flat, a little bit up as some other areas have reduced particularly and we’ve reduced some of the contractor headcount.

Little bit on governance; over the time we've added more -- most recently we've added four new Board members; Chuck Schwab, obviously from Schwab; Jane Shaw who was Chairman of Intel; Lee Scott who was CEO of Wal-Mart; and we brought back David Filo, one of our two Founders of the company as a Board member, great to have them. They add a lot of perspective. I particularly, like in technology companies do see the connection between the founders, entrepreneurs in the company and so having someone like David Filo [completing] about 19 years old. So he still is intimately actively involved and totally engaged in a company is great because he brings perspective that some of us as new folks don't initially have.

Let me maybe stop there as a little bit of start and again we will keep this interactive. I know Rick will ask some questions and again I thank you for coming to see me and Joon today.

Question-and-Answer Session

Unidentified Analyst

Let me take [that further] you've actually sketched out a pretty dynamic situation. I've tried to educate myself a little bit on Yahoo! [inaudible] a period of change, what is that you're going to really lever off of and how do you see perhaps the company's core position evolving over the next 12-18-24 months, do you have a particular product repertoire that you would point out to us that you think can [inaudible].

Ken Goldman

So let's go through -- we are fundamentally in three different revenue streams, there’s a display business, there is a search business and then there is a, what we call other leads listing and fees. Search is just what it says, it’s search. We work both with Microsoft and Bing. We also, we do our own -- some of our own search capability on mobile where it's non-exclusive with Bing. It's about half of our business. Again I am just giving rough numbers here, you can see the number is about $400 million, little over $400 million in basically in search, about $400 million a quarter in display and $200 million in leads listing and fees. I mean it's little over $1 billion but I just wanted to give you some sense of sizing here.

The search business is very core to us. We continue to innovate. It's one of the most fast moving businesses, innovation in terms of just simple things like where you place the search, how do you place it in mobile, where do you place it, how big is the bar, how do you handle advertising, where is the advertising, how do you do the linkage and so forth. So search is very, very active. It's been -- we've been growing. We use it, [a metric] called search, quick driven revenue, that was up about 19% last quarter.

Our overall revenues is not up as much because again without getting to the complications we've had some various guarantees with Microsoft and some various transitions to -- from some old Yahoo! products to Bing which sort of detracted if you will from the growth. But fundamentally search is a growth business. The growth can come more and more from the mobile side.

On display, and before I talk display I just want to sort of differentiate little bit. I think the most of the companies that you might think of in our relevant space, the Googles, the Facebooks, the LinkedIns, Twitters and so forth primarily they provide what we call User Generated Content, UGC. So if you think about Facebook it's the users creating the content, you think about YouTube, it’s the users creating content. If you think about LinkedIn you have people putting their own information, it’s really users creating their own content.

In our case we're quite different in that we have our own news and homepage that you can go to our Yahoo! News homepage and find the news. Unfortunately a lot of it is not as positive as we would like. You can go to sports and Yahoo! Sports -- and by the way one of things we've changed before we got to the company, a lot of these apps and mobile were different names. You wouldn't even know they were Yahoo! products. So we changed everything, so it's a Yahoo! product. So Yahoo! Sports, Yahoo! Finance, Yahoo! Mail I mean those are kinds of products Yahoo! News Digest, those are the products people come and look at.

We also created a number of new areas, what we call magazines and so where they may feature on technology, beauty, health and so forth. So we have a lot of those. We've brought on some very well-known names, editors and commentators like [inaudible] and so forth, Bobbi Brown in terms of beauty. So we're bringing on folks. So we're creating content so a lot of people go to us; you want to go to sports, you go to us. We have a number of editors; we have also have various affiliations with partners out there to provide additional information.

So if you want to know your box scores, you want to know some information on basketball, a number of people are focused on various aspects of basketball, football and so forth, so you get that [financed]. Virtually everyone that I know uses us as their de facto standard for finding various information on various stocks and trending and tracking and metrics, fundamentals as-well-as technical. So we have that.

So that's how we -- and that business up until a few years ago was clearly all desktop-based, laptop-based. The world has changed. The world is going more and more mobile, so that's where we're going as well. We started a little behind, it turns out about 60% to 70% of people that do go to mobile look at apps and so you have to have apps on the phone, be it Android apps or be it IOS apps. So we have more and more apps. You might go to weather for example, there’s an app that we've brought out that a lot of people look at.

So the story is to take the content, continue to evolve out and have best of breed in the content, the various kinds of features we have. So it's the kind of information that people go to everyday, for relevant information to go about their daily lives as we say. So you go through that and keep on moving with the industry and the industry has gone from desktop which people do still use. I mean people sort of -- [definitely] the desktop is a bit overrated here, but we also make sure we have a very vibrant mobile capability.

More and more the mobile is going social, and more and more of the mobile is going video and so more recently we've created -- aligned with Live Nation, so we have a live concert every night or everyday, so there’s not exactly [inaudible]. So we have a lot -- we work with Live Nation's stream live content. You could have seen Justin Timberlake recently, you could have seen Taylor Swift, there’s a number of them, that happened to be a couple of weeks ago I watched [Desert Home]. So looking, these concerts are pretty interesting. [inaudible] same time zone it turns out they were playing at the basically an arena in San Jose 20 miles away, so it's just really cool where you can see that.

So we did some relationships with new -- with shows that used be on TV, like community, a couple of productions we're going to do ourselves relative to some 30 minute comedies. So we've found that video is what really sells, so speak as live and originals or exclusives but we will do things which are more magazine centric like partnership centric as well.

So focusing on video, focusing on social, in terms of new platform, which is mobile and then the advertising keeps on changing. So we talked about stream advertising which again if you look at your phone, you can look, you will see a little, basically ad sort of across your screen, that is what we call native. So it's just easy to see without being distracting but it's very effective. And then we get smarter and smarter in how we monetize that. So those are some of the new trends going forward.

Clearly we're still in the throes of transitioning the company. So we have a lot of work to do. We knew it would take a few years. We came in, in a company that again had a lot of noise around it, hasn't been growing. We're still not growing the way we need to grow. So we are focusing on the core, which initially was bringing the right people, developing the right products and properties some of which I just talked about, increasing engagement and increasing monetization that's the flywheel if you will that we are working on to get this company back to the place we all want it to be. So long winded answer to your question, Rick.

Unidentified Analyst

[Question Inaudible].

Ken Goldman

That’s a hard, I don't know if I could, that’s hard, we don't talk about -- we have somewhere between 750 million and 800 million monthly averages users, I think I got that right Joon, again Joon will correct me if I got my numbers that's not correct. So I think again the opportunity for us to continue to expand out our user base, so to speak, spend out the amount of time that people go to Yahoo! and do that wherever they -- where and when they want to access us and so more and more increasingly that will be on the mobile capability, work with partners where we can will make sense as well.

And also work more and more internationally. I think that's an area that we have to go. We're [inaudible] at because only about a quarter of our business is international and that will be an opportunity for us to grow as we go forward. That's basically not the scale we need to be at internationally.

Unidentified Analyst

[Question Inaudible].

Ken Goldman

We have a number that we provide every quarter. In terms of display we talk about ads sold, we talk about the pricing of ads. In terms of search we talk about number of clicks and the price per click. So those are the two in each of the category the ones we go through. There is a number of other metrics that I do talk about when I talk about the various revenue components and the growth of each of our businesses, and each geographies, I’ll go through that.

But the full metrics that we are currently focused on are again is all in our website. In terms of search it's number of clicks and price per click, in terms of display number of ads sold and price per ad. So those are the key ones we look at. Over time we'll expand that. As we came into the company we wanted to basically create a series of metrics that we felt comfortable with that we felt will correlate with the work we're doing internally.

We also know over time we will increase the number of metrics we provide. We'll I’m sure over provide more information on things like mobile, more information how we are doing social and so forth. So over time we will provide more of those metrics. Clearly they are important. We look at obviously some of the very, the normal metrics we have in financials versus revenue, revenue growth, EBITDA, EBITDA growth, free-cash flow which is another metric which I actually take close to my heart as I do believe free-cash flow is very, very important.

So there is a number of things that we are looking at but the four I mentioned really drive, really correlate to display side of the business as well as the search side of the business.

Unidentified Analyst

[Question Inaudible].

Ken Goldman

Let me take the last one. There is and there is not a high end CapEx. We said we would spend about $500 million this year in CapEx. That was our original forecast for the year. We're spending a little less than that on a quarterly basis today. That’s about 10% of revenue. Where does that go? It goes primarily to datacenters. Datacenters are very, very important. We do -- we do all of our own internally in terms of our capabilities and so all the mail and all the storage of that all the -- we have a product called Flicker, all the storage of Flicker and photos is inherent to us.

All the information we have in terms of the content that we all have that internally. So in terms of CapEx that's how we go. Your other question really relates to competitor. Well again I think the way I -- there always a number of different ways. I think again search, our market share we have about 10% market share we need to grow. With Bing we have about 30, Bing actually has a little over 19%. So combination Bing and Yahoo! is about 30%, Google is obviously the big gorilla with about two-thirds of market share. These are primarily domestic market share. So that’s our market share.

We know we want to do better. It’s an area that we came and that Marissa came from basically Google and search and so we're innovating a lot of it and a lot particularly in the mobile side. So you will see a lot more from us. So we clearly want to grow search. I always tell everyone, that’s an area we want to be long on. Display I sort of talked a little bit about before, we are really quite different than most other folks. In other words if you really want to -- if you want to go one side we again, news, sports, one company that has news, sports, finance, various editors, with entertainment as well. We are really the one company that does that. I mean you don’t get from Google, you don’t get that from LinkedIn and Facebook.

As I said the way I think about it is they are primarily content, I call user generate content which their users are creating basically where in our case our users create some but also we create a lot more and that’s again how we differentiate ourselves from those. That to me is sort of our reason for being if you will. And then search dovetails that because once you are on our content then we make it very easy if you are in our email to go search from there, if you are on our home page to go search from there. So you are staying inside our -- basically our properties to go do your searches. So that’s we want to make it very easy and take this friction out if you will to do search from our property.

So simplistically that’s a little bit of how I think about how we think of ourselves quite differently because there are a lot of folks in related spaces but again I think particularly as you think of all the new companies that create and even think of Whatsapp and all these, basically virtually every company is creating, whether a community or a messenger whatever they are basically user-generated. I mean they are creating a capability that allows the users to go connect. We are quite different in that, yes we do have that but also quite important that we have the other capabilities that I mentioned, that others don’t have and yes we got ESPN for sports. We can even go to ESPN for weather or for news. And so we have it all under one umbrella basically.

Unidentified Analyst

[Question Inaudible].

Ken Goldman

Well it’s a mix. I mean I think what I highly recommend, I don’t know what’s on today, well you go to our home side you will see various, we call various display of banner ads and you will see where companies particularly when they want to announce a new product, maybe a new computer maybe a new car they basically take over the home page for a day. And so -- and the reason they do that because this is a way for them to get in front of millions of users in one day and basically to do a splash out of their capabilities. So the more we make our content relevant -- and then you have obviously another trend going on which I didn‘t talk about before is programmatic advertising.

So the more you allow advertisers, and ad agencies to target a certain demographic, certain age group, certain capabilities. So you look at someone that maybe if you have a lot of news and they see someone they hey, that we know this person that [inaudible] car you say focus on buying a car. Well they happen to be in an area where they want to -- you sell certain beauty products whatever, because they aged and maybe they are female whatever. So you have all of that.

So programmatic is another aspect. So the more we can make or provide relevant content that attracts the relevant demographics of folks, one of the nice things about Tumblr is the age demographically there is a lot younger than the current general Yahoo! demographic. So that’s another way to attract the different demographic for certain advertisers. So the more we are able to create the right targeting, sometimes again it will be our own people selling the ads sometimes there will be basically problematic which is more of an auction-based system in which people say I want to go to this group, this kind of folks that buy these kinds of products. That's -- the more you allow that, the higher the pricing, the bid is for those ads.

Unidentified Analyst

[Question Inaudible].

Ken Goldman

We haven't actually -- that’s one of the areas we haven't talked directly about the metrics. We will do that probably sooner than later. We gave some metrics out at the beginning when we acquired it. We haven't really updated those and so I am going to hold off on really providing any additional metrics on Tumblr.

Unidentified Analyst

[Question Inaudible].

Ken Goldman

Well I think it is variety of things. One is you have to provide, recognize the mobile, on the mobile platform, be it on the smartphone or be it on tablet. However you go mobile we have to create the capabilities, we have to make sure we have very good technology there which were creating ourselves in many cases. If you have -- you put the ads in the right spots you do things where we want to attract more and more folks to our site. So the more we get people to Yahoo! the more they will search from us. And so and you make it easy to search.

I mean for example I think years ago we didn't even have the capability to search directly from mail. And so now if you are in mail and you are on your phone with the mail you can now go right to search. So you do things to make it easy to search and then you keep on making sure your search capability comes back with the right and irrelevant information for users in a way they can read it.

And again it's different on the phone because obviously you like this versus like this. And so you have to make your search differently. There may be different ways you do the URLs and so forth and the way you scroll down. So there are a number of ways that were rethinking if you will the search for the mobile, particularly for the mobile versus the desktop. I don’t know if you can add anything, you have anything that you want to add just feel free.

Unidentified Analyst

[Question Inaudible].

Ken Goldman

I am going to stick with what we say publicly which is the -- when we sell the first tranche at the IPO when that occurs that will be as far as we have assumed that we will be fully taxable regardless of which shares we use. And then going forward we will own -- we have a lot more shares in Hong Kong. So presumably we will have more shares there but again I am not going to say which one we will sell.

And that I've been very clear that we continue to look at ways to look at tax efficient ways and again I am not going to say anything more than we've said publicly on that.

Unidentified Analyst

[Question Inaudible].

Ken Goldman

Well it sounds like a nice activist question. No, I mean we're not -- I am not sure how you, actually I don't know how you have put the company. The -- we fundamentally have two businesses which is search and display. They really go hand-in-hand. I don't think either one would do that well, my opinion by itself.

We obviously have a number of shares of Ali Baba. Again I am not going to talk about various structures there as well, clearly in that case we will sell about a third of our remaining shares on the IPO. The balance will be locked up for I think a year. I think we've said a year, so that will be locked up for a year and then we'll figure a way the best to monetize that over time and that's really about all I can say.

So obviously that those shares will at some point cease to be part of our company but in terms of the company itself, I think search and display has always been part and parcel of the company. It’s how the company was created if you will. And so I don't see -- I don't envision anything that will say we should split those up.

Unidentified Analyst

[Question Inaudible].

Ken Goldman

Well we continue to do well. I mean I think our site in finance is still the number rated. We're very highly rated, I don’t know if we are number one or two in market share on sports. I mean one of the ways interestingly enough we compete is making sure we have the best folks involved and we can do that, folks who want work at Yahoo! first of all, we’re media and technology company, we are in Silicon Valley, we are able to basically incent people with -- to think as entrepreneurs, be it with cash and bonus and stock.

And so our ability -- we're able to attract the best and brightest and so we will compete that way and so a lot of folks who want to work with us just because of -- just exactly that. And so we're very focused. I mean part of it is making sure the right folks are running [inaudible] and what we call our various verticals whether it's finance, sports, weather, I mean again you look at our weather site we've attracted a number of people on weather but just because of the basically the usefulness and the aesthetics if you will of our weather site, I highly recommend take a look at weather and you will see how good it looks.

In that case we're able to basically leverage off of Flicker, so if you look at Weather you will see a screenshot in particularly wherever you look of a photo which basically represents the kind of weather that exists in that particular city. So again the way you compete is you make sure you are the most relevant and have the best information in terms of respective site. You want me or [Joon]?

Unidentified Analyst

[Question Inaudible].

Ken Goldman

Look three things -- two things. First of all we're not the largest shareholder of Alibaba, Softbank is. Two is I by definition cannot comment on Alibaba. We're there in a quiet period, we're in a quiet period relative to them and so I will not make any comments about them.

Unidentified Analyst

[Question Inaudible].

Ken Goldman

You can drive near their area.

Unidentified Analyst

[Question Inaudible].

Ken Goldman

Well no, I am just not totally sure, let me…

Unidentified Analyst

[Question Inaudible].

Ken Goldman

Well, no I am just not sure I understand what the question really is. I am still not sure, is there a question there?

Unidentified Analyst

[Question Inaudible].

Ken Goldman

I am not going to comment on that either.

Unidentified Analyst

[Question Inaudible].

Ken Goldman

Well now let me, I am not sure I understood the question but I am not going to talk about any company I am on the Board of. But I think the thing that we also find very important is technology is very important to us. So having the right capability in our data centers, the right latency as an example and capacity is very, very important. We have had issues from time to time in various products and so making sure we continue to improve the infrastructure is very, very important. And it's funny I was at a conference about a year or so ago and someone was asking me is hardware all going away and I said Jesus, that's funny you say that because as far as I know all capability, all software runs on hardware in some form or another.

So hardware is definitely not going away I think one of the things that's occurred, these are number of trends going on out there. There is some consolidation going on in hardware where the number of companies selling various categories, be it servers, be it PCs, be it storage, in many cases those are reduced, consolidating.

At the same time there’s lot of new technologies, all these new flash companies. So there is new companies, there is new companies in switching and routing, I mean software-defined networking. There is so much going on and that's why I sort of, unfortunately again as I start this conversation you see folks picketing outside and I don’t quite know the exact issue. I think some of our kiosk and so forth. But I know it goes -- one of the things was in the newspaper the other day about hotels, I think Hilton talked about it as being [allow] in kiosk so you can get your key right from a kiosk as opposed to going to the front desk, well that makes all the sense in the world, I mean airlines, even airlines figured that out 10 years ago.

So you can't stop technology and so I think in our case there is a lot of technology actually is being developed. If you look at Google, Facebook and ourselves we create and derive a lot of the technology. You look at Amazon drives a lot of technology because technology is core to providing the capability to our users because again ultimately you need that infrastructure to provide the access of the information that users do want to see.

Let me go right back.

Unidentified Analyst

[Question Inaudible].

Ken Goldman

It's actually both. I mean -- I think I’m not going to say relative to cost per se for display but as much as we need to make sure we as a company refresh it. And so we are looking -- we continue to look at that very hard. In our case, if you will compare three years ago, we had something like 14,000 employees, we have something around little over 12,000 today. I think we have something like 3,000 contractors, close to a 1,000 today. So we have brought down some headcount. So it's not exactly in display.

The other side of the coin to your question is unfortunately we stopped innovating. And so we unfortunately there was a period of time where developers one way or the other were leaving our company. So we need to recreate that capability, particularly in the mobile side. So to fast forward that we both hired a number of people as well as we have acquired a significant amount of talent who we called [inaudible] or talent hires, so we've done all that.

I think in the pricing, again I think one of the things you do is that more you make the displays and you improve programmatically, the more you improve the auction-based systems, the more you have as you go -- the more you -- I mean the more you can create content across both your owned and operated as well as affiliate traffic so you create more opportunity to bid against that technologies better. That allows you to increase pricing.

So we have to do both overtime. We do have to make sure that our pricing is good and it has dropped a bit and you see that from my numbers last quarter. So we want to turn that around overtime. So that's clearly important. On the other hand we know overtime we do need to be more cost effective and we'll continue to look at that but in the meantime we felt it was very, very important in the last couple of years to get back to the core where Yahoo! is great about which is having good products, great products for the user base we have and increase engagement and do that both in the existing platform, be a desktop as well as the evolving platform which now everyone takes for granted on the mobile side.

Let me go there and ask question, yes.

Unidentified Analyst

[Question Inaudible].

Ken Goldman

Well it is an interesting perspective and concern. I mean no matter how much we try to dispel that that's certainly is out there. I think there is a variety of things, one is they do see -- they see quite a bit of cash at some point coming in. Two, is when you -- some of the parts only work if you believe that cash as part of the prize is really cash and is not bought with something that maybe hard to value.

Three, is I think there has been a number of -- I mean we get listed if you will because when companies acquire companies they will list all in the various perspective whatever they will list all the various companies they may have talked to because they require you to do that. And so our name may come up even though we had virtually no discussion with them. So our name may come up and even though we had absolutely no interest our name will come up. So people say hey you must have some interest even though we may have not had any interest.

And the last point I’ll just say is has a number of companies that gets people nervous because there’s a number of companies and particularly the private side doesn’t have very hefty valuations right now and I think people are worried that we might want to acquire those. And having said all that we do look at, we have a hard bar. There is a number of companies that I’m not saying any size now that we have looked at and ultimately decided not to go forward on. We have a high bar in that we know people, investors are looking at us and compare us and then think of our stock price in terms of -- so we have to make sure that the bar, anything we buy is worth more ultimately than buying back our stock because that’s obviously the easy equation to figure out.

So we think long and hard about that. We are not Google or Facebook which have seriously high market caps. And so therefore they have the ability to take [fliers] and I’ll just say fliers so to speak and hopefully it will work. We don’t have that might and we don’t have that quite that same latitude. So we look long and hard before we make an acquisition. We’ve only made one of any reasonably size which is Tumblr. All the others that we have made including the most recent one, Flurry have been modest size to very small size.

Unidentified Analyst

We got the time for one more, back here.

Unidentified Analyst

[Question Inaudible].

Ken Goldman

Well I don’t want to say we won’t do anything. I think we have said relative to the first tranche that we would provide at least 50% back to the shareholders. We have historically liked buying back our stock and I think we have done that because at the various times we look at it we look at our share price in terms of what we think the fair value is and to the extent that we think the stock is attractive we think that’s a better use of cash to buy back shares and provide dividends. And so I won’t say 100% we will do one way or the other. It’s always a measure of what the stock price is versus what we think the fair value is and therefore what we think is best for our shareholders.

And again we had -- I think we got as much as 1.25 billion roughly there. We had [101.5] last quarter fully diluted and actually basic I think was less than a billion. So we have brought our share count down significantly. And again as our goal, as I said before is to grow the core, it will obviously improve overtime the EBITDA and earnings in the core and to the extent that we have less shares outstanding that obviously helps our EPS.

Unidentified Analyst

Thank you so much. [inaudible], thank you again.

Ken Goldman

Thank you. Thank you for being here. I thank you for inviting me.

Unidentified Analyst

[Inaudible]

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