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
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