Note 7 BASIC AND DILUTED NET INCOME ATTRIBUTABLE TO YAHOO! INC. COMMON STOCKHOLDERS PER SHARE

Basic and diluted net income attributable to Yahoo common stockholders per share is computed using the weighted average number of common shares outstanding during the period, excluding net income attributable to participating securities (restricted stock awards granted under the Company’s 1995 Stock Plan and restricted stock units granted under the Company’s 1996 Directors’ Stock Plan (the “Directors’ Plan”)). Diluted net income per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares are calculated using the treasury stock method and consist of unvested restricted stock and shares underlying unvested restricted stock units, the incremental common shares issuable upon the exercise of stock options, and shares to be purchased under the Company’s 1996 Employee Stock Purchase Plan (the “Employee Stock Purchase Plan”). The Company calculates potential tax windfalls and shortfalls by including the impact of pro forma deferred tax assets.

The Company takes into account the effect on consolidated net income per share of dilutive securities of entities in which the Company holds equity interests that are accounted for using the equity method.

For 2011, 2012, and 2013, potentially dilutive securities representing approximately 56 million, 39 million, and 10 million shares of common stock, respectively, were excluded from the computation of diluted earnings per share for these periods because their effect would have been anti-dilutive.

The Company has the option to pay cash, issue shares of common stock or any combination thereof for the aggregate amount due upon conversion of the Notes. The Company’s intent is to settle the principal amount of the Notes in cash upon conversion. As a result, upon conversion of the Notes, only the amounts payable in excess of the principal amounts of the Notes are considered in diluted earnings per share under the treasury stock method.

The following table sets forth the computation of basic and diluted net income per share (in thousands, except per share amounts):


	Years Ended December 31,
	2011			2012			2013
*Basic:*
Numerator:
Net income attributable to Yahoo! Inc.	$	1,048,827		$	3,945,479		$	1,366,281
Less: Net income allocated to participating securities		(15	)		(56	)		(28	)

Net income attributable to Yahoo! Inc. common stockholders—basic	$	1,048,812		$	3,945,423		$	1,366,253

Denominator:
Weighted average common shares		1,274,240			1,192,775			1,052,705

Net income attributable to Yahoo! Inc. common stockholders per share—basic	$	0.82		$	3.31		$	1.30

*Diluted:*
Numerator:
Net income attributable to Yahoo! Inc.	$	1,048,827		$	3,945,479		$	1,366,281
Less: Net income allocated to participating securities		(14	)		(55	)		(28	)
Less: Effect of dilutive securities issued by equity investees		(2,698	)		(4,920	)		(16,656	)

Net income attributable to Yahoo! Inc. common stockholders—diluted	$	1,046,115		$	3,940,504		$	1,349,597

Denominator:
Denominator for basic calculation		1,274,240			1,192,775			1,052,705
Weighted average effect of Yahoo! Inc. dilutive securities:
Restricted stock and restricted stock units		5,347			8,403			14,097
Stock options and employee stock purchase plan		2,695			1,728			4,009

Denominator for diluted calculation		1,282,282			1,202,906			1,070,811

Net income attributable to Yahoo! Inc. common stockholders per share—diluted	$	0.82		$	3.28		$	1.26