Yahoo to lay off 2,000 employees
New chief executive sees company as smaller, nimbler, more profitable
Yahoo Inc. will lay off 2,000 people, or 14 per cent of its workforce, in its deepest round of job cuts in years as new chief executive Scott Thompson tries to jump-start growth from within a leaner, more agile company while saving hundreds of millions of dollars.
Wall Street was lukewarm on the move, after two previous CEOS failed to find an answer to rivals like websearch giant Google and the Facebook social-networking site.
Sunnyvale, Calif.-based Yahoo, which ended 2011 with some 14,000 employees, said it would save $375 million annually from the cuts, and will incur a pre-tax cash charge in the second quarter of $125 million to $145 million. The company declined to comment on severance details.
Some analysts were skeptical about the layoffs, which had been widely expected. “You can’t cut your way to revenue growth,” said Colin Gillis of BGC Partners. “What people want to see out of Yahoo is they want to see a plan and provision for revenue growth.”
Thompson, who took over from the outspoken and occasionally profane Carol Bartz, argued the changes would transform Yahoo into a leaner outfit focused on its core businesses which were identified as “core media and communications,” “platforms” and “data.”
“The changes we’re announcing today will put our customers first, allow us to move fast, and to get stuff done,” Thompson said in a memo to employees on Wednesday, obtained by Reuters, adding that the changes will result in a “smaller, nimbler, more profitable” company.
“We are intensifying our efforts on our core businesses and redeploying resources to our most urgent priorities,” Thompson wrote.
Macquarie Research’s Ben Schachter saw the layoffs as a start in determining the new direction of the company. “Scott Thompson is not there to tweak the business,” Schachter said. “He saw something in the assets to make him think there was potential.”
A Yahoo spokeswoman said that every organization within the company was affected by the layoffs, but that some groups were affected more than others. She declined to specify which particular groups were the most affected.
Yahoo said it would provide more details of its plans when first-quarter results are released on April 17.
The layoffs follow Yahoo’s declining revenue due to competition from Google and Facebook. Last year, Yahoo’s revenue totalled $4.98 billion, compared with Facebook’s $3.71 billion with just 3,200 employees.
Yahoo is also fighting a battle with hedge fund manager Daniel Loeb.
Loeb, who runs Third Point, is seeking to appoint four new directors to Yahoo’s board. Third Point, with a 5.8 per cent stake in Yahoo, is the company’s largest shareholder.