Yahoo! Inc. is laying off 2,000 employees as new CEO Scott Thompson sweeps out jobs that don't fit into his plans for turning around the beleaguered internet company.
The cuts was announced on Wednesday, April 4th 2012, represent about 14 percent of the 14,100 workers employed by Yahoo!.
Yahoo! Inc. is perhaps one of the best known company for its web portal, search engine (Yahoo! Search), Yahoo! Directory, Yahoo! Mail, Yahoo! News, Yahoo! Groups, Yahoo! Answers, advertising, online mapping, video sharing, fantasy sports and social media website and services. It is one of the largest websites in the United States.
The company estimated it will save about $375 million annually after the layoffs are completed later this year. Yahoo! will absorb a pre-tax charge of $125 million to $145 million to account for severance payments. The charge will reduce the earnings in the current quarter.
Some of the affected employees will stay on for an unspecified period of time to finish various projects, according to Yahoo!. The housecleaning marks the sixth mass layoff in the past four years under three different CEOs. This one will inflict the deepest cuts yet, eclipsing a cost-cutting spree that laid off 1,500 workers in late 2008 as Yahoo! tried to cope with the Great Recession.
The previous purges under Yahoo! co-founder Jerry Yang and his successor, Carol Bartz, boosted earnings. But trimming the payroll did not reverse a revenue slump, which has disillusioned investors yearning for growth at a time when more advertising is flowing to the internet.
The cuts are part of an overhaul aimed at focusing on what Thompson believes are Yahoo!'s strengths while also trying to address its weaknesses in the increasingly important mobile computing market.
Thompson is betting Yahoo! will be able to sell more advertising if it is more astute in the analysis of the personal information that it collects from the roughly 700 million people who visit its website each month. He is also looking for ways to improve the products that it makes for smartphones and tablet computers, a goal that may require hiring more specialists in mobile technology.
Yahoo! also has been exploring selling a service, called Right Media that helps place ads around the Web. If a deal gets done, that would enable Yahoo! to shed even more employees. No further details on the Right Media discussions were provided on that effort.
Thompson is making his move three months after Yahoo! lured him away from a job running eBay Inc.'s online payment service, PayPal.
Once an Internet trendsetter, Yahoo! has been outmaneuvered and outsmarted by Google and Facebook in the race for online advertising. Although the website remains a popular destination, people have been spending less time there and dwelling longer on Google services and on Facebook.
That shift has made Yahoo! less attractive to advertisers, a problem that has been compounded by the company's inability to target marketing messages at the right audience as precisely as Google and Facebook. Once a pacesetter, Yahoo! in recent years has been outmaneuvered and outsmarted by internet search leader Google Inc. and social networking leader Facebook Inc. in the race for online advertising.
After announcing the layoffs Wednesday, Thompson promised to share more details about his plans on April 17, when Yahoo! Inc. is scheduled to release its quarterly earnings.
Since Thompson arrived, Yang left Yahoo!, and four other members of the company's board, including Chairman Roy Bostock, have decided to step down later this year. The exodus cleared the way to appoint five new directors to join Thompson.
One largest shareholders of Yahoo!, hedge fund manager Daniel Loeb, is pledging to shake up the board yet again. Spurned by Yahoo!, Loeb has launched a campaign to persuade the company to elect him and three other alternative candidates as directors. If a truce isn't reached, the dispute will be resolved in a shareholder vote at Yahoo!'s annual meeting.
Thompson also picked a fight with Facebook in an attempt to bring in more money to Yahoo!. He is suing Facebook for alleged infringement on 10 of Yahoo!'s internet patents. Facebook denied the claims and retaliated with a patent-infringement lawsuit of its own.