Even as CEO Scott Thompson announced Yahoo's (YHOO) biggest layoff in years, Wall Street analysts and the company's biggest shareholder said Wednesday that they are still waiting to hear what comes next.
Yahoo said it will cut 2,000 jobs, or about 14 percent of its global
workforce, in a restructuring effort that Thompson said will make the
struggling Internet pioneer into a company that is "smaller, nimbler" and
focused on fewer priorities. But the company said Thompson won't outline his
plans in more detail until April 17, when Yahoo reports earnings for the first
quarter.
Yahoo shares rose slightly Wednesday, on a day when Wall Street saw
broader declines. But analysts said the cuts alone, which amount to one of the
largest layoffs by a Silicon Valley company since the 2008 recession, aren't
enough to turn Yahoo around.
"You still need revenue growth," said Martin Pykkonen, an Internet media
expert at Wedge Partners. "There is nothing in this that points to that
directly."
In a memo to employees, Thompson said Wednesday that the Sunnyvale
company will focus on its "core businesses" and Internet platforms, while
working to "unlock the value in our data" -- a reference to delivering content
and advertising that's tailored to the individual interests of 700 million
users.
"Today's actions are an important step toward a bold new Yahoo! -- smaller, nimbler, more profitable and better equipped to innovate," Thompson added in a company statement, while saying Yahoo is "redeploying resources to our most urgent priorities."
Yahoo representatives, however, declined to say which areas will be
affected by staff cuts or which programs Thompson plans to emphasize in the
future. Yahoo said it would begin notifying employees on Wednesday if they are
facing "job elimination or phased transition."
The cuts were widely anticipated. Thompson, who joined Yahoo from PayPal
in January, is under pressure to improve the company's financial performance
and he has previously said "there will be some things that we stop doing."
"The news is not surprising, but we won't know much about Yahoo's
potential turnaround until Scott discusses his plan in more detail," said
Macquairie Securities analyst Ben Schachter.
An equally tepid response came from the company's largest shareholder,
activist investor Daniel Loeb, whose frustration with Yahoo's performance led
him to launch a proxy challenge this spring for four seats on the company's
board.
Calling the layoffs "unfortunately necessary," Loeb said in a
statement that his Third Point investment group "is disappointed that
this round of cuts occurred before CEO Scott Thompson has articulated his
strategic plan for the company."
Noting that several top managers have recently left the company, Loeb
added in his statement, "many of Yahoo's senior-level employees and investors
have apparently seen enough and heard too little."
Thompson was named CEO after previous chief executive Carol Bartz was
fired for failing in her own effort to turn Yahoo around. He promptly launched
a wide-ranging review of Yahoo's business, while examining the possibility of
closing or selling some operations.
Yahoo is profitable and its free services -- including email,
photo-sharing and websites devoted to sports, entertainment and financial news
-- are immensely popular. But revenue and profit have declined steadily in
recent years, as the company has lost share of the online advertising market
to newer companies like Google (GOOG) and Facebook.
The company's stock price, which rose above $33 in 2007, has remained
well under $18 for most of the last three years, despite previous layoffs and
restructuring under Bartz. Yahoo's stock closed Wednesday at $15.27,
up 0.6 percent for the day.
In a statement, Yahoo said it expects to save $375 million a year from
the latest job cuts, while incurring one-time charges of $125 million to $145
million for severance and other costs.
Although the company declined to provide specifics, it's clear a
significant portion of the cuts will affect Yahoo's staff in Silicon Valley.
Historically, nearly a third of its workforce has been based at Yahoo's
Sunnyvale campus. While the Yahoo cuts are one of the valley's largest in
recent years, Cisco Systems (CSCO) laid off 4,400 workers in a 2011
restructuring.
"Over the last 60 days, we've fundamentally re-thought every part of our
business, and we will continue to actively consider all options that allow
Yahoo! to put maximum effort where we can succeed," Thompson said in a memo to
employees. "Unfortunately, reaching that goal requires the tough decision to
eliminate jobs, which means losing colleagues and parting with friends."
The company declined to comment on reports that the layoffs may be the
first wave of broader cuts to come. But analysts said the workforce could
shrink further as Yahoo continues to explore selling or closing some
operations.
Yahoo, which previously outsourced its Internet search operation to
Microsoft, has recently held talks about selling services such as Right Media,
an online platform that helps companies place ads with Yahoo and other sites.
Yahoo also has engaged in talks to sell its holdings in two Asian Internet
companies, although that effort was reported to have stalled earlier this
year.
Thompson has also launched a controversial effort to win revenue from
Facebook, by filing a lawsuit aimed at forcing the popular social networking
service to pay licensing fees for using technology that Yahoo says is covered
by its patents. Facebook responded with a countersuit this week, denying
Yahoo's claims and arguing that Yahoo should pay for using software covered by
Facebook's patents.
RECENT Yahoo layoffs:
The Yahoo job cuts announced Wednesday are the sixth in four years, under three different CEOs:
February 2008 -- 1,000 jobs (under Jerry Yang)
December 2008 -- 1,500 jobs (under Yang)
April 2009 -- 700 jobs (under Carol Bartz)
December 2010 -- 600 jobs (under Bartz)
April 2011 -- 100 to 150 jobs (under Bartz)
April 2012 -- 2,000 jobs (under Scott Thompson)
Source: The Associated Press
