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Yahoo lays off again, cutting 600

Yahoo’s problems stem mostly from its inability to keep pace with more innovative rivals such as Facebook and Twitter. Yahoo’s problems stem mostly from its inability to keep pace with more innovative rivals such as Facebook and Twitter. (Paul Sakuma/Associated Press)
Associated Press / December 15, 2010

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SAN FRANCISCO — Yahoo Inc. is reducing its workforce by 4 percent as it hands out 600 layoff notices for the holidays.

The job cuts announced yesterday follow weeks of speculation about whether a long-running financial funk would spur Yahoo to trim its payroll before the new year.

Reports of Yahoo’s layoff plans surfaced a month ago on two popular technology blogs, TechCrunch and All Things Digital.

This marks the fourth time in three years that Yahoo has resorted to mass firings to boost its earnings.

The company is under pressure to cut costs because its revenue has risen by less than 2 percent so far this year and chief executive Carol Bartz has promised to widen Yahoo’s operating profit margins to as much as 24 percent by 2013.

The margin stood at about 12 percent through the first nine months of this year.

“Today’s personnel changes are part of our ongoing strategy to best position Yahoo for revenue growth and margin expansion and to support our strategy to deliver differentiated products to the marketplace,’’ the company said in a statement.

Yahoo’s recurring layoffs haven’t been enough to lift its stock price, which has been sagging since the company balked at a takeover bid from Microsoft Corp. The May 2008 offer was valued at $47.5 billion, or $33 per share.

The company’s shares fell 7 cents to close yesterday at $16.63, slightly below their value of $17.30 at the end of September 2008, when Yahoo’s payroll peaked at 15,200 employees. Yahoo employed 14,100 people before the latest layoffs.

This round of reductions is concentrated in Yahoo’s US consumer products group, which has been undergoing an overhaul since Bartz brought in former Microsoft Corp. executive Blake Irving to run the division. Since his arrival seven months ago, Irving has pledged to bring “cool back to Yahoo’’ while steering changes that have tied Yahoo’s e-mail and other parts of its website to two of the Internet’s hottest services, Facebook and Twitter.

Yahoo’s struggles have raised questions about whether Bartz, Yahoo’s chief executive for the past two years, might lose her job before her four-year contract expires in January 2013. The doubts about Bartz have been heightened by a wave of defections among Yahoo’s top executives and her lack of previous experience in online advertising — Yahoo’s main source of income.

Bartz, 62, has repeatedly said it’s too early to judge her turnaround efforts because she inherited such a mess from her predecessor, Yahoo cofounder Jerry Yang. Yahoo’s 10-member board, which includes Yang and Bartz, has given no indication that it’s disappointed in Bartz’s performance.

Yahoo’s problems stem mostly from its inability to keep pace with Facebook, Twitter, and other younger, often more innovative rivals. Although Yahoo’s website still attracts more than 600 million worldwide visitors, many are staying for shorter periods.

That competition compounded the challenges already facing Yahoo after getting trounced by Google Inc. in the Internet’s lucrative search market. Although the pendulum shifted several years ago, Yahoo was once far larger than Google and even toyed with the idea of buying its then-smaller rival, just as it once did with Facebook.

Unable to pull off those deals, Yahoo now finds itself lagging behind Google and Facebook as advertisers spend more of their marketing budgets on the Internet.

Google’s revenue during the first nine months of the year climbed 23 percent to nearly $21 billion, more than quadrupling Yahoo’s revenue of $4.8 billion during the same period.

After some of its past layoffs, Yahoo gradually expanded its payroll despite its lackluster financial performance.

There’s a chance that could happen again because Yahoo said yesterday that it’s still in hiring mode, particularly for jobs for its mobile and location services.

The holiday-season layoffs further magnify the contrasting fortunes of Yahoo and its rivals.

Google, for instance, added nearly 3,500 employees to its workforce this year and promised everyone raises of at least 10 percent next year. The company, based just a few miles away from Yahoo’s Sunnyvale, Calif., headquarters, also gave all 23,300 of its workers an after-tax holiday bonus of $1,000.

Yahoo’s laid-off workers will get severance packages. The company declined to provide further details.