Searching for secrets at Yahoo…

Like a lot of people, we’re curious about what’s ultimately going to happen to Yahoo (YHOO). But more immediately, we’re also curious why the company was so keen on keeping the words “Quarterly Financial Review” and “Timing of Reports” confidential earlier this year.

And we really do mean those words, and a handful of others — we’re not even talking about more detailed information that might fit under those headings, but the mere words themselves. They served as headers in an amendment to Yahoo’s searching-and-advertising agreement with Microsoft (MSFT) — specifically, the Fourth Amendment to Search and Advertising Services and Sales Agreement initially filed with the Securities and Exchange Commission as Exhibit 10.18(H) to the 10-Q that Yahoo filed on August 8.

At the time, vast swaths of the amendment were redacted — replaced, in the electronic version, with little bracketed asterisks that, a footnote informs us,

“Indicates that certain information in this exhibit has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to omitted portions”

All well and good. We get why Yahoo and Microsoft might not want all the details of their pact available to competitors. But in retrospect, it’s surprising just how much is really hidden from investors (putatively the company’s owners, after all). Here’s section 7 of the Fourth Amendment, for example, in its illuminating entirety:

7. [*].

(a) [*]. Section 10.2.6 of the Agreement is amended such that [*], is deleted and replaced with the following:


(b) [*]. Section 10.2.6 of the Agreement is amended such that [*], is deleted and replaced with the following:


But then, on December 2, Yahoo filed a 10-Q/A amending its August filing, primarily to swap in a revised version of that Fourth Amendment, along with a revised version of a Fifth Amendment originally included with the same August filing. (Try to follow along: We’re talking about revised versions of amendments to an agreement that originally went into effect December 4, 2009.)

Lo and behold, this is what was hidden in section 7 before the first sub-part — again, in its entirety:

“Timing of Reports.”

Nothing more is shown of what sub-parts (a) and (b) say, so we’re not exactly sure how much additional knowledge is really gained by this particular disclosure. Nor is it an isolated example. Section 6 was previously all but blank (noting that “The third sentence of Section 10.2.5 of the Agreement is deleted and replaced” with redacted text); the revised version helpfully shows that the heading for section 6 is “Key Controls” — but nothing more. Section 5, it turns out is headed, “Quarterly Financial Review,” but for all we know its substance is a skillfully drafted haiku about the Yahoo toolbar.

The Fifth Amendment, originally filed as Exhibit 10.18(I) on August 8, and then in revised form on December 2, is slightly more revealing. In addition to telling us that the section 3 heading is “Financial Incentive” (but little about what those incentives are), and that section 7 of this amendment is titled “CPP Ads,” it also discloses that multiple deadlines occurred on October 11 this year. Sadly, it’s not terribly clear for the most part what those deadlines really entailed, or what was to happen if the deadline was or wasn’t met.

In short, after going to some lengths to hide a lot of information about its pact with Microsoft, Yahoo has gone to still more effort to disclose a smidgen of almost utterly meaningless additional information about it. This doesn’t seem to be at the SEC’s behest, because no staff comment letters are on file since July. (Though thanks to the SEC’s sometimes lengthy delays in disclosing comment letters, it’s possible that something more recent is awaiting disclosure.)

Companies get permission from the SEC to hide all kinds of things from investors, generally on the grounds that the information constitutes trade secrets, or that disclosure would hurt their competitiveness. We run into redacted material fairly often, and, much more rarely, see the SEC pushing back against corporate bids to keep stuff confidential. But as The Wall Street Journal’s Scott Thurm and Jean Eaglesham showed in a different context last week, it’s easy to forget just how much is kept under wraps.

So in the abstract, it’s nice to see a company revisit confidential material and disclose a little more. But when it comes to Yahoo’s baby steps, we have to say thanks for next to nothing.

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