Yahoo Poised To Lay Off Hundreds
months as chief executive
, Yahoo Inc. co-founder Jerry Yang has concluded
hundreds of employees will have to be fired to help the slumping Internet icon
recover from years of misguided management.
The Sunnyvale-based company's biggest purge since the dot-com bust most likely
will be announced next week, a person familiar with the matter said Tuesday.
The person asked not to be identified because the exact number of jobs to be
cut is still under discussion.
Yang and his management team already have committed to jettisoning at least
several hundred jobs to help boost Yahoo's profits and placate investors demanding
more action to reverse a steep decline in the company's stock price.
Securities analysts are betting Yahoo will trim its 14,000-employee payroll
by about 5 percent -- or 700 workers. If that many people are dumped, Yahoo
could save about $100 million, JP Morgan analyst Imran Khan estimated in a Tuesday
Besides trimming Yahoo's expenses, job cuts could help buy Yang more time to
carry out his strategy to re-establish Yahoo as a main entry point to the Internet
and create a more compelling online advertising network.
Many investors had been questioning whether Yang was too emotionally attached
to the company that he started in 1995 to make the tough decisions needed to
turn it around, said Standard and Poor's equity analyst Scott Kessler.
"A lot of what drives the market comes down to perception and, rightly
or wrongly, there is a perception that Yahoo needs to be repaired," Kessler
said. "To gain credibility, you need to make hard choices like this."
In a statement, Yahoo said it is embarking on a muliti-year transformation
aimed at enriching long-term shareholders.
"Yahoo plans to invest in some areas, reduce emphasis in others and eliminate
some areas of the business that don't support the company's priorites,"
the statement said.
From Wall Street's perspective, the layoffs are long overdue. Through September,
Yahoo generated just under $364,000 per employee, well below an average of nearly
$565,000 per employee at six other major Internet companies, including Google
Inc. and eBay Inc., Khan calculated.
News of the looming job cuts didn't lift Yahoo's stock Tuesday amid rising
recession worries. Yahoo shares fell to a new 52-week low of $19.27 before rebounding
to close at $19.92, down 86 cents or 4.14 percent.
Yahoo shares have dropped 28 percent since the company tapped Yang to replace
Terry Semel as CEO in June.
Yahoo, which prides itself on pampering employees, hasn't resorted to a mass
layoff since jettisoning 650 workers in 2001 to offset losses that piled up
after a dramatic downturn in Internet advertising.
Although the company has remained profitable through its latest struggles,
Yahoo hasn't been making enough money to satisfy Wall Street at a time when
advertisers are spending substantially more on Internet ads.
Google has been the biggest winner in the online ad derby so far, largely by
outsmarting Yahoo, which was once the larger of the two companies.
Despite spending millions to improve its technology, Yahoo has been falling
farther behind Google in the lucrative search market. Through December, Google
processed 56 percent of all search requests in the United States, leaving Yahoo
a distant second with 18 percent of queries, according to Nielsen Online. More
importantly, Google now makes more money in a couple months than Yahoo does
in a year.
Yahoo also has been struggling to retain younger Web surfers with the rise
of hipper online hangouts like Facebook.com and News Corp.'s MySpace.com.
As part of its turnaround efforts, Yahoo has been phasing out its least popular
services -- a process that has accelerated under Yang's leadership.
A social networking service called Yahoo 360 and a Europe-based comparison
shopping service called Kelkoo appear to be the next candidates to go. Yahoo
management is expected to discuss its plans for those two services Jan. 29 after
the company releases its fourth-quarter earnings.
The layoffs probably will be outlined during the earnings conference call or
a couple days later, according to the person familiar with the company's timetable.