Jackson Securities, LLC Equity Update

Research for the Prudent Investor July 18th, 2006

Yahoo! (YHOO: NASD; $32.24) – 2QFY06: Quick First Look

Brian Bolan, Research Analyst
(312) 253-0578; BBolan@JacksonSecurities.com

Quick Discussion

Yahoo! Reported earnings of $0.11 per share, and gross revenues of $1.12B, missing the consensus as
well as our estimate. Benefiting from a summer surge in traffic due to the World Cup and partially offset
by summer traffic patterns, Yahoo posted a disappointing quarter and guided in line for next quarter and
the remainder of the year. We will update our earnings model in the coming days to reflect this change,
but before the conference call begins, we want to highlight these key points from the earnings release and
some ideas that might come up on the conference call.

3 Key items of interest on the conference call will include a discussion of the following:

¾ Click fraud and the recent estimates that have been publicized in the media as being as high as
14% or greater. We note that YHOO management believes that its’ filtering and billing process is
as good as any that is available in the market today, so insinuations that they may be weaker on
this front than GOOG will be met with resistance.

¾ World Cup Traffic boosted numbers this quarter and might set up some challenging numbers
for next years second quarter.

¾ Search Monetization efforts will certainly be highlighted. The higher than expected revenues
are an indication that search monetization has improved and future improvements can be expected.

Important Disclosures

Jackson Securities, LLC seeks to do business with companies covered in its research
reports. As a result, investors should be aware that the firm may have a conflict of
interest that could affect the objectivity of this report. Investors should consider this
report as only a single factor in making their investment decisions. Please also refer
to the important disclosures found on pages 3 and 4. Analyst Certification is found on
page 3.

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The above graph illustrates the growth in fee paying customers, a metric we believe is key to the valuation
of Yahoo!. In the quarter, Yahoo! added 1.2M fee paying customers, bringing the total to 14.3M. This
represents an increase of 8% from the previous quarter and 42% from the year ago period.

Yahoo! Income Statement ($ in millions, except per share)

Q2'05 Q1 Q2E Q2A YOY QOQ % from E
Marketing Services, Gross 1,094.3 1,380.9 1445 1386 27% 0% -4%
Less: TAC 377.9 479.4 505.75 453 20% -6% -10%
Marking Services, Net 716.4 901.5 939.25 933 30% 3% -1%
Fees 158.7 186.2 200 190 20% 2% -5%
Total Net Revenues 875.1 1,087.7 1139.3 1123 28% 3% -1%
Gross Revenues 1,253.0 1,567.1 1645 1576 26% 1% -4%

Cost of Sales 108.0 176.9 165.2 193 79% 9% 17%

Gross Profit 767.1 910.8 974.1 930 21% 2% -5%

Operating Expenses
Sales and Marketing 246.4 292.3 307.6 325 32% 11% 6%
R&D 125.5 179.9 193.7 208 66% 16% 7%
General and Adminis. 81.4 97.9 103.7 131 61% 34% 26%
Amortization 41.4 30.9 50.0 34 -18% 10% -32%
Stock Comp 10.9 108.6 100.0 100 817% -8% 0%
Total Op Expenses 505.7 709.6 754.9 798 58% 12% 6%

Operating Income 261.4 201.2 219.1 229 -12% 14% 5%

Interest Income & Other 979.7 35.4 36.0 36 -96% 2% 0%

Pre-Tax Income 1,241.1 236.6 255.1 265 -79% 12% 4%

Taxes 515.9 109.9 111.0 122.7 -76% 12% 11%

Equity Earnings 33.1 26.4 27.0 21.6 -35% -18% -20%

Minoritiy Interest (3.7) (0.3) (0.3) -0.3 -92% -6% -6%

Net Income 754.7 159.9 170.8 164 -78% 3% -4%

GAAP EPS $0.51 $0.11 $ 0.11 0.11 -78% 1% -2%

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Fully-Diluted Shares 1,484.2 1,493.3 1,503.3 1476.6 -1% -1% -2%
Disclosures:

Analyst Certification
I Brian Bolan hereby certifies that the views expressed in this research note accurately reflect
my personal views about the subject securities and issuers. I also certify that no part of my
compensation was, is, or will be, directly or indirectly, related to the specific recommendations or
views expressed in this research report. I may be compensated in part based on the overall
profitability of Jackson Securities, LLC, which includes earnings from investment banking and all
other aspects of the firm’s business.

Conflicts of interest:
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has a position in the securities described herein.

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Explanation of Ratings:
Buy - Expected 12-month absolute performance of +10% or higher than the market price at which time
the rating was issued.
Hold - Expected 12-month absolute performance of +5% to –5% from the price at the time the rating was
issued.
Sell - Expected 12-month absolute performance of –10% or lower than the market price at which time the
rating was issued.

Distribution of Ratings:
Jackson Securities, LLC has a distribution of ratings among its coverage universe as follows:

Buys – 65.5% (38 of 58 active recommendations)

Holds – 31.0% (18 of 58 active recommendations)
Sells – 3.5% (2 of 58 active recommendations)

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Jackson Securities has provided investment banking services within the previous 12 months with the
following percentage of the companies they have rated:

Buys – 2.64% (1 of 38 active recommendations)

Holds – 0% (0 of 18 active recommendations)
Sells – 0% (0 of 2 active recommendations)

Risks: General economic conditions, economic slowdown/recession, adverse industry news.

Other Important Disclosures and Disclaimers

Disclaimer: This communication is neither an offer to sell nor a solicitation of an offer to buy any
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capital may occur.

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