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Note 8. Interest Income and Other, Net

The components of interest income and other, net were as follows (in thousands):

Interest Income and Other, Net

Interest income and other, net decreased $161.1 million from the three months ended March 31, 2008 to the three months ended March 31, 2009. This decrease was primarily a result of an increase in net foreign exchange related costs of $92.6 million and a decrease in interest income of $55.9 million due to lower yields on our cash and investment balances.

Interest income and other, net decreased $63.7 million from the three months ended December 31, 2008 to the three months ended March 31, 2009. This decrease was primarily a result of an increase in net foreign exchange related costs of $41.5 million and a decrease in interest income of $22.4 million due to lower yields on our cash and investment balances.

The costs of our foreign exchange hedging activity that we recognized to interest income and other, net are primarily a function of the notional amount of the option and forward contracts and their related duration, the volatility of the foreign exchange rates as well as the movement of the foreign exchange rates relative to the strike prices of the contracts.

As we expand our international business, we believe costs related to hedging activity under our foreign exchange risk management program may increase in dollar amount in 2009 and future periods.

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Interest Income and Other, Net

Interest income and other, net increased $48.7 million from the three months ended September 30, 2008 to the three months ended December 31, 2008. This increase was primarily a result of a decrease in net foreign exchange related costs of $32.1 million and an increase in realized gains on sales of marketable securities of $18.5 million.

Interest income and other, net decreased $273.2 million from the year ended December 31, 2007 to the year ended December 31, 2008. This decrease was primarily driven by an increase in net foreign exchange related costs of $155.7 million primarily due to more hedging activity under our foreign exchange risk management program, and a decrease in interest income of $169.7 million due to lower yields on our cash and investment balances. These decreases were partially offset by an increase in realized gains on sales of marketable securities of $43.0 million.

Interest income and other, net increased $128.5 million from the year ended December 31, 2006 to the year ended December 31, 2007. This increase was primarily driven by an increase in interest income of $147.1 million due to higher cash and investment balances, partially offset by a decrease in foreign exchange gains of $21.5 million.

The costs of our hedging activity that we recognize to interest income and other, net are primarily a function of the notional amount of the option and forward contracts and the movement and volatility of the foreign currency exchange rates.

As we expand our international business, we believe costs related to hedging activity under our foreign exchange risk management program may increase in dollar amount in 2009 and future periods.

Interest Income and Other, Net

Interest income and other, net decreased $36.7 million from the three months ended June 30, 2008 to the three months ended September 30, 2008. This decrease was primarily driven by an increase in net foreign exchange related costs of $38.7 million primarily due to more hedging activity under our foreign exchange risk management program.

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Interest income and other, net decreased $133.2 million from the three months ended September 30, 2007 to the three months ended September 30, 2008. This decrease was primarily driven by an increase in net foreign exchange related costs of $84.2 million primarily due to more hedging activity under our foreign exchange risk management program. In addition, there was a decrease in interest income of $55.1 million due to lower yields on our cash balances.

Interest income and other, net decreased $175.8 million from the nine months ended September 30, 2007 to the nine months ended September 30, 2008. This decrease was primarily driven by an increase in net foreign exchange related costs of $120.2 million primarily due to more hedging activity under our foreign exchange risk management program. Also, there was a decrease in interest income of $113.5 million due to lower yields on our cash balances. These decreases were partially offset by an increase in net realized gains on sales of marketable securities of $47.8 million.

The costs of our hedging activity that we recognize to interest income and other, net on a quarterly basis are primarily a function of the notional amount of the option contracts and the volatility of the foreign currency exchange rates.

As we expand our international business, we believe costs related to hedging activity under our foreign exchange risk management program may increase in dollar amount in 2008 and future periods.

Interest Income and Other, Net

Interest income and other decreased $109.4 million from the three months ended March 31, 2008 to the three months ended June 30, 2008. There was an increase in net foreign exchange related costs of $44.5 million primarily due to more hedging activity under our foreign exchange risk management program. In addition, there was a decrease in net realized gains on sales of marketable securities of $39.3 million as well as a decrease in interest income on marketable securities of $33.9 million. The decrease in interest income was primarily related to lower yields on our cash balances, as well as lower average cash balances as a result of cash used in the first quarter to acquire DoubleClick.

Interest income and other decreased $79.2 million from the three months ended June 30, 2007 to the three months ended June 30, 2008. This decrease was primarily driven by a decrease in interest income of $49.9 million due to lower yields on our cash balances. In addition, there was an increase in net foreign exchange related costs of $43.3 million primarily due to more activity under our foreign exchange risk management program.

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Interest income and other decreased $42.6 million from the six months ended June 30, 2007 to the six months ended June 30, 2008. This decrease was primarily driven by a decrease in interest income of $58.4 million due to lower yields on our cash balances. Also, there was an increase in net foreign exchange related costs of $35.9 million primarily due to more activity under our foreign exchange risk management program. These decreases were partially offset by an increase in net realized gains on sales of marketable securities of $46.8 million.

As we expand our international business, we believe costs related to hedging activity under our foreign exchange risk management program may increase in dollar amount in 2008 and future periods.

Interest Income and Other, Net

Interest income and other of $167.3 million in the three months ended March 31, 2008 primarily consisted of $122.0 million of interest income earned on our cash, cash equivalents and marketable securities balances. In addition, we recognized $46.6 million of realized gains on sales of marketable securities.

Interest income and other of $130.7 million in the three months ended March 31, 2007 primarily consisted of $130.5 million of interest income earned on our cash, cash equivalents and marketable securities balances.

Interest Income and Other, Net

Interest income and other of $167.3 million in the three months ended December 31, 2007 was primarily comprised of $144.6 million of interest income earned on our cash, cash equivalents and marketable securities balances. In addition, we recognized $34.2 million of net gains on sales of marketable securities and $13.9 million of net foreign exchange losses.

Interest income and other of $589.6 million in 2007 was primarily the result of $559.2 million of interest income earned on cash, cash equivalents and marketable securities balances. In addition, we recognized $51.2 million of net gains on sales of marketable securities and $16.2 million of net foreign exchange losses.

Interest income and other of $461.0 million in 2006 was primarily the result of $412.1 million of interest income earned on cash, cash equivalents and marketable securities balances. In addition, we recognized $40.2 million of net gains on sales of marketable securities primarily as a result of the sale of our investment in Baidu and $5.3 million of net foreign exchange gains.

Interest income and other of $124.4 million in 2005 was primarily the result of $121.0 million of interest income earned on our cash, cash equivalents and marketable securities balances.

Interest Income and Other, Net

Interest Income and Other, Net

Interest income and other of $154.4 million in the three months ended September 30, 2007 primarily consisted of $146.1 million of interest income earned on our cash, cash equivalents and marketable securities balances.

Interest income and other of $422.3 million in the nine months ended September 30, 2007 primarily consisted of $414.6 million of interest income earned on our cash, cash equivalents and marketable securities balances.

Interest income and other of $108.2 million in the three months ended September 30, 2006 primarily consisted of $108.2 million of interest income earned on our cash, cash equivalents and marketable securities balances.

Interest income and other of $336.9 million in the nine months ended September 30, 2006 primarily consisted of $290.3 million of interest income earned on cash, cash equivalents and marketable securities balances. In addition, we recognized a $41.9 million net gain realized on the sale of marketable securities primarily as a result of the sale of our investment in Baidu.

Interest Income and Other, Net

Interest income and other of $137.1 million and $267.9 million in the three and six months ended June 30, 2007 was primarily comprised of interest income earned on our cash, cash equivalents and marketable securities balances.

Interest income and other of $160.8 million in the three months ended June 30, 2006 was primarily comprised of $103.0 million of interest income earned on our cash, cash equivalents and marketable securities balances. In addition, we recognized a $54.9 million gain from the sale of our investment in Baidu.

Interest income and other of $228.7 million in the six months ended June 30, 2006 was primarily the result of $181.9 million of interest income earned on cash, cash equivalents and marketable security balances. In addition, we recognized $46.8 million of net gains on sales of marketable securities primarily as a result of the sale of our investment in Baidu as noted above.