Ya­hoo cuts jobs as it pur­sues spin-off

The Pak Banker - - COMPANIES/BOSS -

Ya­hoo Inc said it would con­sider "strate­gic al­ter­na­tives" for its core In­ter­net busi­ness and cut about 15 per­cent of its work­force, even as it con­tin­ues with its plan to re­vamp the busi­ness and spin it off. The an­nounce­ment is the strong­est sign yet that the board and Chief Ex­ec­u­tive Marissa Mayer may be will­ing to sell the strug­gling In­ter­net busi­ness - es­sen­tially web­sites, email and on­line search - un­der grow­ing pres­sure from im­pa­tient share­hold­ers.

In an in­ter­view, Mayer said the com­pany will en­ter­tain of­fers as they come but its first pri­or­ity is the turn­around plan. If it re­ceives an of­fer this year, it was un­likely that the trans­ac­tion would be com­pleted be­fore the 9 to 12-month time­line pro­jected for the spin-off, she said. "We would ob­vi­ously en­gage but I think the one thing we're try­ing to do is set our share­hold­ers' ex­pec­ta­tions in terms of com­plex­ity," Mayer said. The planned re­struc­tur­ing an­nounced on Tues­day in­cludes the clo­sure of of­fices in five lo­ca­tions, a par­ing down of its prod­ucts, shift­ing more re­sources to mo­bile search, and the sale of some non-strate­gic as­sets such as real es­tate and pa­tents.

In­vestors were not im­me­di­ately im­pressed, send­ing Ya­hoo shares down 1.2 per­cent af­ter hours. They have now fallen 36 per­cent over the past 12 months.

"We be­lieve the strate­gic plan does not fully ad­dress the core is­sues which have de­stroyed share­holder value - poor cap­i­tal al­lo­ca­tion, bad strate­gic part­ner­ships, out of con­trol spend­ing and a bloated work­force," said New York-based SpringOwl As­set Man­age­ment, a share- holder which has called for changes at the com­pany. The web pi­o­neer's rev­enue peaked in 2008 and while it still runs some of the world's most-read web­sites, it has been un­able to keep up with Al­pha­bet Inc's Google and Face­book Inc in the bat­tle for on­line ad­ver­tis­ers.

In the re­jig of its busi­ness, it will fo­cus on three main con­sumer plat­forms, Search, Mail and Tum­blr, and four "dig­i­tal con­tent strongholds" in the form of News, Sports, Fi­nance and Life­style. The changes are de­signed to in­crease mo­bile, video, na­tive and so­cial ad­ver­tis­ing rev­enue 8 per­cent to $1.8 bil­lion and cut op­er­at­ing costs by $400 mil­lion this year. It is also aim­ing to gen­er­ate $1 bil­lion to $3 bil­lion in as­set sales.

Mayer dis­missed ac­cu­sa­tions of ex­ces­sive spend­ing, say­ing a re­port of a $7 mil­lion bill for Ya­hoo's hol­i­day party was ex­ag­ger­ated by a fac­tor of three. Ya­hoo's ad­justed quar­terly rev­enue tum­bled 15 per­cent to $1 bil­lion af­ter de­duct­ing fees paid to part­ner web­sites, as it strug­gles to keep its share of on­line search and dis­play ad­ver­tis­ing. Mayer pro­posed in De­cem­ber that Ya­hoo spin off its main busi­ness af­ter it aban­doned ef­forts to sell its Alibaba stake. In the in­ter­view on Tues­day, Mayer said the com­pany in­tends to group its stake in Ya­hoo Ja­pan with the main busi­ness, but would be open to split­ting it off de­pend­ing on mar­ket feed­back.

The com­pany re­ported a loss of $4.43 bil­lion, or $4.70 per share, in the quar­ter, due to a large write-down to ac­count for the lower value of some units. That com­pared with net in­come of $166.3 mil­lion, or 17 cents per share, a year ear­lier. Among the write-downs, the com­pany took an im­pair­ment charge of $230 mil­lion for Tum­blr, the so­cial blog­ging site for which it paid $1.1 bil­lion in 2013. Ex­clud­ing items, Ya­hoo earned 13 cents per share in line with ex­pec­ta­tions.

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