Oct 19th 2008, 10:35 pm
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Yahoo Plans Major Cost Cuts, Including Layoffs!
From WSJ:
Quote:
Yahoo Inc. is drafting significant cost-cutting plans to try to reverse its fortunes from the inside.
The Sunnyvale, Calif., Internet company is expected to disclose the cost cuts as soon as Tuesday, when it reports quarterly earnings, say people familiar with the matter. The cuts will involve layoffs, among other things, these people say.
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The exact number of jobs to be eliminated remains unclear, though it is expected to exceed the 1,000 jobs that Yahoo announced it was cutting in January, say people familiar with the matter. Precisely which jobs will be excised isn't likely to be announced for at least a few weeks, say these people, though cuts are expected to come from across the company. Yahoo had 14,300 employees as of the end of June.
The San Jose Mercury News and several technology-industry Web sites have reported that Yahoo is planning job cuts.
Some Yahoo managers have also been asked to identify operating budget cuts of around 15%, according to people familiar with the matter. The company's U.S. hiring has slowed to a trickle, and Yahoo recently let go of two to three dozen external recruiters, according to these people.
Yahoo's moves come as the economic crisis is spurring belt-tightening across the country. But the Internet company's pain is more acute. Yahoo is scrambling to bounce back from years of disappointing revenue and profit growth as it has seen rivals such as Google Inc., News Corp.'s MySpace.com and Facebook Inc. grab more growth in the Internet sector.
Earlier this year, Yahoo spurned Microsoft Corp.'s takeover offer of $31 a share, or $45 billion. The move brought in activist investor Carl Icahn, who pressured Yahoo to sell itself to Microsoft and who has since taken a seat on Yahoo's board, along with two other directors he recommended. In the wake of the failed purchase, Yahoo's stock price has slid 43% in the past three months. On Friday, Yahoo shares closed at just $12.90.
Since Microsoft walked away from its bid, Yahoo has shuffled its management team and announced some new products to try to shore up its stock price. These have done little to improve the company's performance or restore investor and employee confidence in managers, including Yahoo chief executive Jerry Yang, who some shareholders blame for Yahoo's rejection of Microsoft's offer.
Yahoo says it has recently hired consultants Bain & Co. to help identify potential "structural changes." People familiar with the matter say that process continues and could result in suggestions beyond layoffs. Yahoo's new board also continues to ponder many moves, including a combination with Time Warner Inc.'s AOL, say people familiar with the discussions.
The two companies have been exploring a deal for months. People familiar with the situation say the two sides have started to discuss a value for AOL below the $8 billion to $10 billion that had been on the table before. The combination would see AOL folded into Yahoo, with Time Warner taking a minority stake.
Last week, Microsoft CEO Steve Ballmer raised the possibility that Yahoo and Microsoft could still pursue a search partnership during comments at an industry conference but said that there were no conversations between the companies about such a deal or a full acquisition of Yahoo by Microsoft.
Meanwhile, an Internet-search partnership with Google designed to help Yahoo generate hundreds of millions of dollars in additional revenue has run into a regulatory hitch. After many large advertisers have come out against the deal, which they fear could raise online ad prices, Google has been talking to the Justice Department about revising the agreement to prevent regulators from thwarting it, say people familiar with the matter.
At the same time, Yahoo is faced with a troubled economy that is causing some advertisers to rein in spending. The cutbacks appear to be hitting Yahoo's business harder than some of its competitors. Advertisers are reducing spending for display ads, the graphical ads that make up much of Yahoo's revenue, faster than other segments such as search ads, Google's stronghold.
Marianne Wolk, an analyst with Susquehanna Financial Group, says given the economic climate, 10% to 15% budget cutbacks for Yahoo would be "sensible." But she added that such moves would do little to address the company's bigger problems such as an exodus of employees and a broader "graphical advertising business that appears to be in freefall."
Investors will also be watching for whether spending cutbacks from some brand advertisers have grown severe enough to cause Yahoo to cut its annual revenue estimates. Yahoo is forecasting revenue of between $1.78 billion to $1.98 billion for the third quarter quarter and between $7.35 billion and $7.85 billion for the year.
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