Global Delivery Direct, Inc.

Company Profile

Welcome to Global Delivery Direct!

The assessment projects for this class course will examine different facets of the

leadership of Global Delivery Direct, Inc. (GDD) and students will be exploring various

scenarios and providing analysis and recommendations from the perspective of a

leadership consultant. Each project has been carefully designed to provide students

with opportunities to demonstrate mastery of various leadership concepts which have

been presented in the classroom (both in the face-to- face and online discussions). The

projects focus on the following areas:

In project 1, students will demonstrate an understanding of the broad role of a leader

within an organization.

In project 2, students are expected to apply course concepts and materials to

provide real-world leadership skills with respect to personnel development.

In project 3, students will present their analysis and recommendations that

demonstrate their ability to create a report that examines ways a leader blends their

social architect role with soft skills and business acumen to fix the problems of a

failing business merger.

Global Delivery Direct, Inc.

History

Package

GDD is a medium sized global delivery organization that started in 1968 in Norfolk, England when four classmates at the London School of Economics, Joseph Knoll Windsor, Giles Hartford Weatherspoon, III, John Smyth Heathering, and (the American) Andrew Rockfish banded together to make their fortune. The then very young men found what they saw as a great opportunity in the decision of the Royal Air Force to auction off retired war airplanes. Having met in the school flying club, the men decided to invest together in the purchase of three retired British WWII cargo planes. The partners repaired the planes with the help of a retired pilot friend. Repainted white, the planes with their distinctive winged box design displayed on the tail engaged clientele worldwide. Starting small, the ex-pilots took jobs wherever they could find them using their parents’ military contacts to enlarge the business. Soon they had several regular customers, Europe and America. As the company grew, the four pilots decided to expand from just small parcels to a mail and document delivery service as well. They took the European market by storm with their introduction of the 2-day turnaround from Britain to the US East Coast. Encouraged by the growth, and anxious to return home, Andrew Rockfish decided with the consent of the others to expand the service to America in the hopes that it would draw a larger customer base from the new multi-national companies. The American market grew quickly. By the end of the decade, GDD had a nationwide presence. The 1980’s, however, saw the rapid growth of Fed Ex and UPS in the global delivery service. UPS in Germany started in 1976. After a few hiccups the German post office was no longer a competitor. The overnight delivery promise put both firms on the map. It was GDD’s position as number one that sustained its competitive advantage. GDD kept their customer base in national air cargo deliveries, but global overnight was proving to be more difficult. Expansion in Asia Pacific to include Australia gave the company sizeable growth. America fought to hold their market share by moving in to Canada by the end of the decade. The European branch remained competitive because their customers were not easily moved to change to large American giants. In the 1990’s GDD’s Asia Pacific branch continued to expand the Asian and Australian market. America was holding its own against the two big shipping giants Fed Ex and UPS, but new competitors like the United States Postal Service were also now picking up the private company overnight delivery market as well. DHL (a German company) had also come into the market and was focused in the business-only clientele. However, the company was too late in entering the competition. It did not prove to be the threat that the GDD leaders thought DHL might be. The heavy competition brought a dip in sales in 2012 globally as competition with America’s large firms put pressure on the company to keep up. GDD’s fleets of airplanes for the three branches are aging; the need for capital investment is on the horizon. In addition to the strong competition, regulations, airport fees, and fuel costs are making profits shrink. GDD watched both Fed Ex and UPS create personal shipping stores to enhance their individual customer shipping experience meet with

modest success. The now aging owners are looking for ways to grow the company. The Pan Asian market is still strong for the company as is the small business market for national sales in America. The company is currently owned by the four founders who hold 60% of the stock equally, with capital investors holding the remaining 40%. Current Company Vision: The delivery company to the business world. Current Mission: To provide cargo and mail services to businesses around the globe with excellent service and direct simplicity. Employees will seek to foster a personal relationship with customers through the anticipation of their needs, understanding the logistic challenges facing their deliveries, and always finding ways to succeed in getting the customer served.

Services Offered

Package and Mail delivery

Current Fact Sheet

Headquarters London, England Worldwide web address www.gddexpress.com Executive Director Corporate Services John Smythe Heathering 2015 revenue $2.245 billion Employees 6,500 (3,000 U.S.; 3,500 International) PACKAGE OPERATIONS 2015 delivery volume 1.750 billion packages and documents Daily delivery volume 47,946 million packages and documents Daily U.S. air volume 15.822 million packages and documents Daily international volume 32,124 million packages and documents Service area More than 15 countries and territories; Every address

in North America, England. France Customers 750 million pick-ups, 1.6 million deliveries

Operating facilities Delivery fleet 34,926 package cars, vans, tractors, motorcycles,

including nearly 1,000 alternative fuel and advanced technology vehicles

Jet aircraft 80 Short-termed leased or Chartered aircraft 25 Daily flight segments Domestic - 340; International - 615 Airports served Domestic - 122; International - 246 Air hubs United States Charlotte, NC (main Global Air Hub); Dallas, Texas;

Ontario, Calif., Rockford, Ill. Europe Midland, England Asia Pacific Taiwan, Australia Latin America and Caribbean Miami, Fla., USA

Canada Hamilton, Ontario

Current Asset Sustainability Commitments GDD currently has under contract the purchase of one new cargo aircraft with financial commitment of $2.6 million. In addition, four older model planes are being retro-fitted with the newest, more fuel efficient modifications. Measures are constantly taken to lower flight speeds, optimize flight paths, clean aircraft engines regularly and use technology to increase precision of aircraft departures, arrivals and taxi times. Ground Fleet cars, vans, buses are currently dependent on gas and diesel* (*over half)... Electric vans are being evaluated at this time for purchase. State-of-the-art knowledge management technology was purchased in 2015 to reduce route costs and scheduling conflicts to minimize expenses.

Current Business Philosophy GDD has determined its long-term goal planning pattern. It will now look forward two years as change in business strategy is imperative to keep growing. The need for innovation and competitive edge ideas are the main focus for the next two years. Sustainability both for profit and planet is foremost in the minds of the leadership. The development of “green” friendly delivery strategies will be a main emphasis. Carving out a sustainable niche market is also important. Current Asset Sustainability Commitments GDD currently has under contract the purchase of one new cargo aircraft with financial commitment of $2.6 million. In addition, four older model planes are being retro-fitted with the newest, more fuel efficient modifications. Measures are constantly taken to lower flight speeds, optimize flight paths, clean aircraft engines regularly and use technology to increase precision of aircraft departures, arrivals and taxi times. Sustainability both for profit and planet is foremost in the minds of the leadership. The development of “green” friendly ground delivery strategies is a main emphasis. Ground Fleet cars, vans, buses are currently dependent on gas and diesel* (*over half). Electric vans are being evaluated at this time for purchase. State-of-the-art knowledge management technology was purchased in 2015 for the North American division that reduced route costs and scheduling conflicts. Expansion to the remaining divisions will be executed in the next 18 months or sooner if possible. Currently a companywide tacit knowledge mentoring program is in the planning stages and IT is working with planners to devise ways to store of this information in the Cloud especially in terms of making it user friendly for those with less technical savvy. Innovation and Adaptability Development of organizational structure and culture changes are being made to introduce more collaborative decision making as well as bringing the divisions closer

together in the area of shared resources and communication. The emphasis is to encourage the exchange of ideas, create an environment that fosters new ideas and makes change easier in their implementation. GDD understands that innovation must always be focused on the customer. Customer innovation workshops run by GDD has helped to bring new customers into the business. New ideas of future logistics are being explored to help identify new processes that will fit customer needs and their individual growth potential. GDD seeks to expand the workshop initiative with other collaborative ideas for the future as customers are very interested in how the supply chain affects their own competitive edge.

Globalization There is a consideration of expanding to Africa to develop a lower cost hub connecting Europe and North American flights. Selection of the best country and potential development and cost feasibility will be evaluated. Process will start soon to see its money making potential.

Current Corporate Culture GDD has always considered their employees to be like family. They value their input in the business and seek to empower them whenever they can. The current company culture is a hybrid clan and collaborative. The growth of the company and the need for structure and communication to keep the global deadlines has caused the Directors to move towards a collaborative culture. They hope that the family feel of the clan culture

will not be lost hence the hybrid. Organizational Structure: This company has a geographical division structure. However, within each division is a functional structure with logistics focused on getting the parcel or mail delivered in the fastest possible way. Communication and decision making rather than being kept at higher levels is being given to the lower levels to make decisions that affect core operations. Current Organizational Structure

Executive Director Corporate Services

John Smythe Heathering

Executive Director North American

Division Andrew Rock Fish

Executive Director Asian Division Joseph Knolls

Executive Directive European Division

Giles Hartford

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32

Challenges The privately ownedAlibaba Group was one of China's biggest Internet companies special-

izing in electronic commerce. In 2005,Yahoo invested $1 billion inAlibaba for a 40 percent

equity share. It also handed over the responsibility of operating its Yahoo! China Web site to Alibaba. The two companies began negotiations in 2010 on the future of Yahoo's invest-

ment. Softbank, a Japanese Internet and telecommunications company, had also invested

in Alibaba. In addition, Softbank had a 65 percent stake in Yahoo ! Japan, with Yahoo own-

ing the rest. Alibaba and Softbank wanted to buy out Yahoo's stake in Alibaba as well as

its stake in Yahoo! Japan. While Yahoo agreed to the Alibaba divestment (it had made no

decision on the Yahool Japan issue), the bone of contention was in structuring the deal to minimize Yahoo's tax bill on the capital gains. In late August 2)L2,Yahoo announced that it would sell half its Alibaba investment immediately for $7.6 billion (resulting in after-tax cash of $4.3 billion) and the rest when Alibaba was expected to go public in 2015.24 The

key challenge to Mayer in this area was how to use the proceeds of the Alibaba investment.

Early on, she had indicated that she would use the proceeds to make critical acquisitions,

but pressure from shareholders had caused her to back off from this position.

In addition to the Alibaba issue, Mayer faced the main strategic challenge of establish-

ing Yahoo's identity as a company. While it had started out as a technology firm, its princi-

pal revenue source was currently advertising. However, many Yahoo insiders still regarded

themselves as working for a technology company that had a presence in media. Daniel Loeb's insistence that Yahoo's best bet was to find a way to monetize its visitor traffic in-

dicated that he wanted Yahoo to morph into a media company. Given Mayer's technology

background and experience at Google, would this morphing play to her strengths? The growing markets were Asia and Africa, regions where Yahoo had only a weak presence.

Should Yahoo acquire companies to benefit from growth in these markets? In addition, the Internet was moving to a mobile platform where Yahoo had only a marginal presence.

White the mobile platform was showing tremendous growth (albeit from a small base), it was not clear whether it would support traditional revenue sources. Management faced these issues prior to meeting with the company's board in September.

,aCharles Arthur, "Yahoo Sells Chunk of Alibaba Stake," The Guardian, September 19,2012, www.guardian

.co.uk/technologyt20l2lsepllglyahoo-efinance, accessed September 24,2012.

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Yahoo!Inc.30-11

EXHIBIT 6 Yahoo! [nc. Selected Stock price Data (g at close of market)

Date Prire

19.18

11.73

15.01

16.12

15.47

15.74

Source: Yahoo! Finance, http://finance.yahoo.com_/, accessed May 2,2012.

Enter Marissa Mayer Early Actions Prior to joining Yahoo, Marissa Mayer had a 13-year career atGoogle, where she held a va- riety of positions. She was responsible for launching more than 100 products at Google and was a key player in developing Google's home page. Her last position at the compaiy was vice-president of Local, Maps, and Location Services, where she led the producfmanage- ment, engineering, design, and overall strategy for the Google Maps suite of products.2r

One of the first things that Mayer did at Yahoo was to announce that she would review every hire that the company made, a practice similar to that done at Google by the com- pany's two co-founders. While this slowed down hiring atYahoo, one anonymous company employee was quoted as saying:

It's gotten a little frustrating. But I can't say that I blame her. The problem at yahoo in the past couple of years has been "B-players" hiring ,.c-p1ayers,, who were not Iired up to come to work and were tolerated too long. I mean nobody good wanted to come to yahoo. If I am inheriting a mess like that, I'd want to review all the talent that comes in the doors. too.22

She quickly instituted a number of changes at the company. principal among them were a weekly all-employee meeting every Friday afternoon, free food in the company cafeteria, replacement of employees' BlackBerry phones with a choice of iphones or Android-based phones, and the launch of a program termed "pB&J,,'an acronym for process, Bureaucracy, and Jams' The PB&J program was to solicit employee input on a variety of things including improving the work culture and increasing p.odo.iiuity. one employ"L."u","d to Mayer,s actions:

while the free food and iphones are nice, it was the midnight email that finally won my heart' Redundant processes and policy, and bureaucracy, are the worst enemies to innovation and efficiency. ofcourse, change will not happen overnight. There are so many things that need to improve in order to get us back in the same league as Google and Appte. But I have faith in the company and Marissa. And I trury hope the company *itt u" gr;t again.2:l

2r"Board of Directors," Yahoo!, http://investor.yahoo.neL/directors.ctm, accessed September lg, 2012. 22Nicholas Carlson. "Marissa Mayer Reviews Every New Hire at yahoo," B usiness Insider,september 4, 2012, www'businessinsider.com/marissa-mayer-is-reviewing-every-single-new-hire-at-y

ahoo-2012-g,accessed September 19,2012. z3Nicholas carlson, "Marissa Mayer ssnt a Late Night E-mail promising to Make yahoo .The Absolute Best Place to Work."' Business In.sider, Au,grtst27, 2012, www.businessinsider.com/marissa-mayer-sent-a-late-night- email-promising-to-make-yahoo-the-absolute-best-p1ace-to-work

-2012-8, accessed September 1g, 2012.

Jan.,2,2669 ,Jan. 2. 2009

Jan'.4 201.0

,J,aln,,3,201 | ' lJan,3, 20,12 t. rSept. 4;2012:,

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30

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30-10 Case 30

EXHIBIT 5 tConrinuedi

Assets

2010 20"11

Current Assets:

Cash and Cash Equivalents

Short-term Marketable Debt Securities

Accounts Receivab{e, net

Prepaid Expenses and Other Current Assets

Ttrtal Current Ass€ts

Long-term Marketable Securities

Property and Equipment, net

Goodwill

lntangible Assets, net

Other Long-term Assets

lnvestments in Equity lnterests

Total Assets

1,526,427

1,357.661

1,028,900

432,550

4,345,s48

744,594

1,653,422

3,681,645

255,87A

235,136

4,01 1,889

14,928,1M

1,562.390

493,1 89

1,037 ,474

359,483

3,452,536

474,338

1.710,888

3,900,752

254,600

220,628

4,749,044

14,782,786

Liabilities & Equity Current Liabilities:

Accounts Payable

Accrued Expenses & Other Current Liab.

Deferred Revenue

Total Current Liabilities

162,424

1,248,792

254,656

1,625,872

166.595

&48,044

194,722

1,247.3i61 Long-term Deferred Revenue

Capital Leases & Other Long-term Ljab.

Deferred & Other Long*terrn Liabilities

Total Liabilities

Stockholders' Equity

Total Liabilities and Equity

56,365

142,799

506,658

2,331,694

12,596,41A

14928,104

43.639

134,90s

815,534

L201,439

12,581,347

14,7&2,786

\&hoo! lnc' Summary Statements of Cash Flow (in $ thousands for year ended December 31)

2AA9 2010 20r1 Net Cash Flow Provided by Operating Activities

Net Cash (Used in) Provided by tnvesting Activities

Net Cash (Used in) Provided by Financing Activities

Effect of Exchange Rate Changes on Cash & Cash Equivalents Net Change in Cash & Cash Equivalents

Cash & Cash Equivalents at Beginning of \bar Cash & Cash Equivalents at End of year

1,3 i 0,346

(2,419,238)

34,597

57,429

(1,016,866)

2,292,296

1,275,430

1,240,19A

509,915

(1,s01.706)

2,598

250,997

1,275,43A

1,526,427

1,323,806

242362 (1,455,958)

(34,247j

35.963

1,526,427

1,562,390

Source: Adapted fromYahoo! Inc. 201 I 10-K. Yahoo! Forrr 10-K, Annual Report, http://investor.yahoo.net/secfiling.cfm,/filinglD=1193125 -12-86912&ClK=l 01 1006. accessed Mav 2. 2012.

30-8 Case 30

EXHIBIT 4 Yahoo! Inc. Revenue Breakdown

"Listings-based services revenue, transaction revenue, and fees revenue.

24

lEurope, Middle East, and Africa.

Source: Yahool Form 10-K, Annual Report, http://investor.yahoo.net/secfiling.cfm?filinglD=1193125-12 -86972&CIK=101 1006, accessed May 2, 2012.

needs by delivering ilnovative and meaningful search, local, and listings experiences on the search results pages and across Yahoo!"1e In December 2009, Yahoo entered into a ten-year agreement with Microsoft whereby Microsoft would get a 12 percent share of search rev- enues and would provideYahoo with the technology that ran its search engine. The agreement discontinued Yahoo's existing relationship for this purpose with Google. Yahoo generated revenues from this category via listing fees and transaction fees in addition to advertising.

Products such as Yahoo ! Homepage, Yahoo ! News, and Yahoo ! Finance formed the cor- nerstone of the Media category whose goal was to engage users with "compelling con- tent."zo While the majority of revenues for this category came from advertising, Yahoo! Sports services such as Yahoo! Fantasy Football were fee-based. Exhibit 4a provides a breakdown of Yahoo's revenues.

Yahoo managed its global business geographically, reporling financial results by three segments-Americas, EMEA (Europe, Middle East, and Africa), and Asia Pacific (Exhibit 4b reports financial results per geographic segment). Yahoo sites were in 45 lan- guages in 60 countries.

Sales, Marketing, and Product Development Since advertising was the primary revenue driver, Yahoo organized its sales team into three categories based on the type of customer served. The field advertising sales channel sold display and search advertising to leading advertisers and agencies. The mid-market chan- nel sold advertising to medium-sized businesses, and the reseller/small business channel sold it to regional and small business advertisers. While Yahoo employed its own sales teams in the United States, it used a combination of internal salespeople and external sales

'elbid. ,olbid.

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30-6 Case 30

17

in its decision. . . . We are not opposed to a transaction with Microsoft if it is in the best interests of our stockholders. Our position is simply that any transaction must be at a value that fully reflects the value ofYahoo!, including any strategic benefits to Microsoft, and on terms that provide certainty to our stockholders.l3

Carl lcahn's Proxy Fight After Microsoft withdrew its offer on May 3,2008, activist investor Carl Icahn (who had invested in Yahoo earlier and owned 4.98 per cent of Yahoo's common stock) launched a proxy fight to replace all l0 board members with his own nominees at the upcoming annual stockholders' meeting. Icahn's intention was to force the sale of Yahoo to Microsoft upon gaining control of the board.la On July 2l,2}}},Yahoo announced that it had settled with Icahn by appointing him to the board and giving board seats to two of his nominees. In re- turn, Icahn agreed to withdraw his proxy fight. He eventually resigned from yahoo's board in october 2009 and in 2010 began to rapidly decrease his investment in the company.

Third Point LLC's Activismls Daniel S. Loeb, who headed the hedge fund Third Point LLC, began accumulating yahoo shares in 2011 and by March 2012 held,5.8 percent of the company's outstanding shares. He began to actively campaign for changes after several unfruitful meetings *itn CgO Scott Thompson. Loeb was firm in demanding that Yahoo's strategic direction should be to find ways to monetize the millions of site visitors per month. Rather than focus on pushing Yahoo into new businesses, which was Scott Thompson's vision, Loeb wanted Yahoo to focus on its media business. He argued that in hiring two executives to the board with a technology background (whichyahoo had done in February 2}r2),yahoo was mov- ing away from the media business. In addition, Loeb demanded that the company sell its Alibaba stake as well as its 35 percent stake in Yahoo Japan and use the capital to strengthen its core advertising business. Loeb filed a proxy statement to gather support for his four nominees (three of whom had advertising backgrounds, the fourth was himself to replace the more technology-oriented yahoo board members.

"Resum6gate" On May 3,2012, a Silicon Valley Web site reported that Daniel Loeb had written to yahoo,s board about a possible discrepancy in CEO Scott Thompson's educational background. Loeb had alleged that Thompson had inaccurately indicated that he had graduated with dual degrees in accounting and computer science, whereas in reality he had graduated with just an accounting degree. Since Yahoo had reported Thompson's educational back- ground in regulatory filings, this error amounted to a misrepresentation of facts.16 yahoo's board admitted that Loeb was correct in his accusations and after an internal investigation, Thompson resigned from the company. patti S. Hart, a member of yahoo's board who

r3Yahoo! Press Release, April 7, 2008, http://files.shareholder.com/downloads/yHOO/2435053555xox1g5760/ ab576752-f008-457a-b678-186098240468NHoo_News_2008_4_7_General.pdf,accessedMay 2,2012. laDavid Litterick, "Yahoo! Rejects Microsoft and Carl Icahn Bid," The Telegraph,July 14, 200g, www.tele$aph. co.uk/finance/newsbysector/mediatechnologyandtelecoms/2'793196/Yahoo-rejects-Microsoft-and-Carl-Icahn- bid.html, accessed September 18, ZOl2. t5Evelyn M' Rusli, 'Activist Investor Charls Plan to Revitalize Yahoo," The New yorkTimes, March 9,2012, pp. B1, B5; and proxy statements filed by Third Point LLC, http://files.shareholder.com/downloads/yHOO/ 2435053555x0x5899140-12-1761 101 1006/fl1ing.pdf, accessed May 2,2013 and http://flles.shareholder.com/ downloads/YHoo/2435053555x0xS899140-12-204/101 1006/filing.pdf, accessed M ay 2,2012. r6Poornima Gupta, "Yahoo CEO Scott Thompson's Resume Is Faked, Third point Alle ges," The Hffington Posl, www.huffingtonpost.com/2012/05103/scott-thompson-resume-yahoo_n_1475700.htm1, accessed September I 8. 201 2.

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Yahoo!Inc. 30-5

12 Jerry Yang, one ofY. ahoo's co-founders, replaced Terry Semel as cEo in 2007. yahoofaced intense competition from Googre in ihe intern"t advertising ,f*" una the two com_panies competed with each other to acquire complementary businesses. A combinationof intensifying competition and the global economic slowdtwn resulted in yahoo,s firstemployee layoffs in earry 200g and a second round at the end of the same year. In 200g,Microsoft made a second bid to acquire Yahoo, after its 2006 bid had been rejected. JerryYang and Roy Bostock (yahoo's board chairman) convinced ,t . "o-pury,s

board to reject

13 :lit",, ffi'I?;ff"':i":,Jff:#J;TJ,St31I"ffi; ;;;*ed wi,h,urningaround the company and toward thaigoal she announced a search engine partnership withMicrosoft' sold several u1!9-+errormirg acquisitions, and discontinue? certain services. Inaddition, Bartz expanded yahoo's gtouit presence by making key acquisitions in regionssuch as the Middle East. Howev"r, yunot,, revenues declined ior the third consecutiveyear in fiscal 2010 and the company announced further emplo; i;;#, to cur cosrs. Bartzwas fired by Yahoo's board in rate 2011 after failing to turn *orrirrr" company. she was

14,.,]ii",ffi ;ii:ilir#.'J,IT,ylTi;Jlffi ffl :H,Lll;f"T,lHll:*L;;; would become the company's new cEo. Thompson,s tenure was short as he was forcedto step down on May 13, 2072, after it was revealed that he had falsif,ed his educationalbackground on his resum6. During Thompson's tenure, Daniel Loeb, who controlled thehedge fund rhird point LLC, became u, u"iiuirt investor atyahoo anJ demanded sweeping

1 s ::Hq ffi i:frlT"ir{,ilffi T::,'"il1"10,," "*".;"*. ;",10".,,,.,0"d downand FredAmoroso became board chairman. yahoo appointed Ross Levinsohn (who headedthe company's media business) as interim CEo and began an intense search for a perma_nent leader. At the Jury 12,2012, annual srockholders,Leeting, o"ri"i Loeb and rwo ofhis nominees were erected to yahoo's board. on July 16, 2012, theboard announced thatMarissa Mayer, a senior executive at rival Google, was to be yahoo,s new cEo. RossLevinsohn' who had fuly expected to be named yahoo', p".-ur"ricEo, ."rigr"d fromthe company after Mayer,s appointment.rr

CORPORATE GOVERNANCE AT YAHOO

The Microsoft Bid 16 on February 1,2008, Microsoft made an unsolicited bid to acquire yahoo by offering (incash and stock) g3l per sharg valuing the company at $44.6Ulttion. yahoo,s stock pricehad closed at $19.18 the previous aay. whenyanoo's board rejected the offer, Microsoftincreased its bid price to $33 per share.12 once again, yahoo rejecteo rrr" ula, demanding$37 per share (valuing Yahoo at $47.5 bilil;j. In a leter to Steve Ballmer, Microsoft,sCEO, offering the rationale for rejecting the bid, yahoo stated:

our Board ' ' ' unanimously concluded that it (the bid) was not in the best interests of yahooland its stockholders. our Board cited yahoo ! 's grobal brand, rarge worrdwide audience,significant recent investments in advertising pruiro.-, and future growth prospects, free cashflow and earnings potential, as well as it, ,iurturtiut unconsolidated investments, as factors

rtKara Swisher' "Exclusive-Ross Levinsohn Departs Yahoo," http://allthingsd. corl20120730las-expected-ross-levinsohn-depalts-yahoo/, accessed May Z, iOtZ. r2"Microsoft

Makes unsolicited Bid for Yahoo," 1y'8 CNEWS.com,www.msnbc.msn .cofii/idt22g47626/ns/business-us-business/t/microsoft-makes-unsoricit"a-iia-vur.,oo, accessed September rg, 2012.

yahoo!Inc. 30_3

:Jr:T"Tt"l and Twitter had a distinct advantage over porrars and,search sires. A 2012 study

Facebookr",";J;:i;":T;.'ff]l]ilffi::;,:l";?1:hrXf.:1il]*H::Hn:ff 10.6 percent for all of Googte.s sites, *jS.S percent foryahoo,s sites.6 rnrernet adverrising r"r;ru;r i;;J',in,,"d r,u,", ,r;r; $J;;u,uio, in 2,lls(comparedto $39.5 bilion for broadcast t"f"u,.ion'urA $:O Uifflon ior .uUr" ,"f"U.ion), representing trJffiffi;lf,ilH:llover 2010 An industry ".p;;;;r;; the signincance orcross_

This historic m< anincreased"{t"n!-,1ff iff ffi i:l,JJ#iil:il:J;ti"J"H1T,ffi

":,"_t"."T#::."spending their time_in digital media. fuJing pur,,n" SrO Oiiir", Uroi"" the interactiveadvertising industrli confirms its .entrai ,fu." in ,"aiu. a..or, ;;, display, anddigital video, digital provides a wearrh oiippo.unrty for brands unJ.orrr.".r. with rheproriferation of smartphones and tabtets, i, i; rit rv *", ,h" ;;;;alu, g.or,r, in mobilewill continue as these screens u*r-.."", more crucial to the marketing mix.67 The fastest-growing segment of Intemet.advertising was mobile advertising, which to- 1131#;1, ?itt1tT.1:H['""

u" "i'

i + q perc ent il;6 il ;n inaus trv Exo;; ;- The year 2011 saw mobile advertising become a meaningful category. By combining someof the best features of the Interner,

"ri* *t,n portabilityind ro"u'tioi-nu."a rechnology, frx3*:Xl:ffing

is enabring ,"*r",".i to a"iiu". tr,n"iy,;;;;;;;;evant, and rocar see strons **,* l#llli#*ffiH1,:?1,"#,,Jfr::,t". ;, t;i;;"," reasons that we

8 In 2011' the 10 leading search and portal companies accounte d tor TTpercent of totalonline advertising revenues, while the next l5 accounted r., li'rir."rt. search revenuesof $14'g billion (up from srr.z uiiri"r'ir roto-r made up 46s iercent of rorar revenues(up from 44.8 percenr *??l:),*fril. ji.pf"V_retated uar"rtirirgi":us $11.1 biltion (versus$9'6 birion in 20r0) or34.g percenr. o;;" two prevarentpric'ing moders. perlormance_ "*,:Lf:*r,;:;:

,* cricr_ir'ougtr; r,uJ u"", ,r," a"_l,iri",ite1 since 2006 and ac_, - - "1,", """i,

:;' ;::;; ;: T, ;:ii::',H: :;,:, _ *,,;"_ ;" around 6 1 3 mi,,ionweb sites worldwide in Februaryiniz','"{irrrin"ur, in"r"ur" r-i ra, miltion in2011.several factors were responsible for the growth of the rnternei ciri"r among them werethe increasing affordabiiity or.orpr,"rr"io increasing rn,.rn.i'p.r.tration rares. [n avirtuous cycle, as componenr prices fell .upiory,-rC".i#;;r."^ passed on the pricedecreases to customers, who in turn ir..""."; ,rr" a"-una-fficr,'i"ror* to rower pricesdue to manufacturers' ,".ororri"" oi r"rr" "ro+r..rr^ug io,J* ,urirgr. For example,nearly 80 percent of U.S. househords owr"i

" ac-,n ,orz, ipL#i o"r""r, in 2000, andthe vast majority of users had bought a fi;. a similar device for Int2011, Norrh America had the r*g"?jr"riJ penetration .","

"r rr.uiTrlr"ir?,'i"",il#] #oceania/Austraria with oz.s perc"eni;;;;;"p" with 6r.3 percent. However, the fastest_growing market in percentage terms was Africa, and the fastest-growing market in absolute

5IAB. Internet Advertising Report , Aprlt 2012,www.iab.net, accessed september 24, 2012. lbid. 8lbid.