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More painful cuts come, as expected; Yahoo blames bad economy for its misfortune

DailyTech reported earlier this month that Yahoo was contemplating job cuts.  Faced with sagging growth and market share loss to Google, coupled with the possible loss of the Google ad partnership due to regulatory headaches, Yahoo had few other options than to make cuts.

Yahoo co-founder and CEO Jerry Yang, under pressure by some investors of late to resign, gave a statement describing the cuts, stating, "We have been disciplined about balancing investments with cost management all year, and have now set in motion initiatives to reduce costs and enhance productivity.  The steps we are taking this quarter should deliver both near-term benefits to operating cash flow, and substantially enhance the nimbleness and flexibility with which we compete over the long term."

At least 10 percent of Yahoo's workforce will be slashed, meaning that at least 1,520 will lose their jobs.  The company hopes that the cuts will help it to reduce costs, while not significantly reducing its profitability. 

The cuts were the second for Yahoo this year, with the company letting 1,000 employees go this last January.  In total, Yahoo has let go close to 16 percent of its workforce since the start of the year.

Yahoo will also be relocating offices and consolidating real estate to try to reduce costs.  Mr. Yang stated in a conference call, "We are identifying ways we can operate more efficiently."

Yahoo's revenue for the quarter was $1.79B USD, up 1 percent from the quarter a year before.  Without the commissions it paid ad partners, the company pulled in $1.33B USD, slightly lower than the average analyst prediction of $1.37B USD.  Net income for Yahoo was $54M USD, down 51 percent from last year.  Profits excluding one-time charges were $123M USD, roughly in line with analyst expectations.

While the report contained some disappointing spots, it mostly was in line with analyst predictions, so some analysts hailed it as good news for the troubled search firm.  Sandeep Aggarwal, Senior Internet Analyst at Collins Stewart described the report as having "no more negative surprise beyond what we had already expected."  And Jeffrey Lindsay, senior analyst with Sanford C. Bernstein & Co said that the report "could have been a lot worse."

Mr. Lindsay praised the job cuts, stating, "If they really do take the staff numbers down for real, that will have a very beneficial effect."

Yahoo's management is blaming a weak economy for their company's struggles.  Yahoo Finance Chief Blake Jorgensen described in a statement, "An increasingly challenging economic climate and softening advertising demand contributed to revenues this quarter coming in at the low end of our outlook range.  While we are disappointed with our results, we're pleased that we continue to benefit from the aggressive cost management efforts we have pursued during the year."

Yahoo stock recently perked up after falling to the $11/share range, after Microsoft CEO Steve Ballmer commented that Microsoft might still be interested in Yahoo or parts of Yahoo.  Microsoft had offered Yahoo $32/share, almost three times the current stock price, but Yahoo had rejected the offer, stating it was worth significantly more.



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RE: Only in America
By Gzus666 on 10/22/2008 10:00:21 AM , Rating: 2
Most likely they do what most companies do now, they fire a ton, then make the existing employees do even more jobs. This starts wearing people thin, and will end up costing them in the end. It seems like bonus freezes or as suggested, reduction in the top end pay would produce better results, and keep morale with the workers higher. An unhappy employee is a unproductive employee.

This was most likely a knee jerk reaction to stock holders complaining. You would think they would have figured out happy employees put out better products, but that seems to completely go over the heads of most businesses.


RE: Only in America
By omnicronx on 10/22/2008 10:09:40 AM , Rating: 1
You can't just lower salaries, they signed a contract. So they can either fire a bunch of employees, or fire management, which one do you think would be worse for the company? And I am sure many people in a management position would rather be fired than take a pay cut, they can probably find a job somewhere else, plus the company will be forced to pay what is probably a hefty severance.


RE: Only in America
By Gzus666 on 10/22/2008 10:16:52 AM , Rating: 2
Yes, I'm sure all their management is needed and they are completely unlike all the companies I have seen that have tons of managers that do little to nothing. I would be more for cutting bonuses, bonuses are not guaranteed by any contract, and clearing out some of the worthless management which most likely runs rampant like any other business.


RE: Only in America
By sgw2n5 on 10/22/2008 10:57:55 AM , Rating: 2
THIS.

Trimming the fat in a company should start from the top down.


RE: Only in America
By Regs on 10/22/2008 1:23:12 PM , Rating: 2
Intel did, HP did it and it all worked out. HP is another story though, but they were actually worse than they were today with middle management always getting in the way of the sales force.


RE: Only in America
By Emryse on 10/22/2008 8:03:27 PM , Rating: 2
Wow... well you clearly aren't part of management. And you clearly don't own your own corporation or Yahoo-scale business. I would be surprised if you owned your own business.

I'm sorry, but the last place you cut salaries is the top management. Why? Because they possess the experience, the expertise, the talent, and the leadership to MANAGE.

And management isn't just telling other people "do this". It's coming up with and championing innovation within the company, protecting and perserving the competitive edge, and developing the core competencies of the business.

A "non-management type" likely does not know how to do any of that. You can also be certain that *in most cases* businesses never lay off their top talent (unless a person just doesn't know how to market himself on the job). So whoever Yahoo choose to be "trimmed" from their staff were in most cases likely the correct choices.

Your idealistic socialist model of "they shouldn't get millions if I'm only getting thousands (or maybe hundreds in your case)" doesn't work in the real world.

If someone is making millions, *usually* it's because they deserve to and have worked hard to get to where they are, and are making major contributions to get that pay.


RE: Only in America
By sgw2n5 on 10/22/2008 10:14:45 PM , Rating: 2
So it is wrong for Yahoo to trim management fat even if they run the company into the ground? That would be mediating the problem at the source would it not?

I don't care how things work at the McDonalds you manage, but in the real world, it is the management/executives who are held accountable for a failing company.


RE: Only in America
By omnicronx on 10/22/2008 11:37:55 AM , Rating: 2
I am not saying you can't fire managers, restructuring and trimming management has been the norm for 10 years. And Bonus's are very much part of a contract, I know mine is, but I had to ask and bargain for it.

My point is you can only clear out so much fat, managers whether you like it or not are a necessity to the business, and nobody in their right mind would take a paycut if they have the skills to be in a managerial position in the first place. I would rather be let go anyday and receive a nice sum of money for doing so, not to mention the I.E you can receive until you find another job.

And the article never states that all the employess let go were normal workers, I would be surprised if they did not 'trim the fat' where it was possible in the managerial positions.


RE: Only in America
By Gzus666 on 10/22/2008 12:01:11 PM , Rating: 3
I would be surprised if they actually trimmed from anything but the lowest of management. Managers are needed, too many managers aren't. I think managers think they are more important than they really are, that is why business degrees are a joke, and everyone who couldn't do something else has one. Most managers aren't that good at something that is arguably quite easy. Common sense is pretty much all that is really needed to do it well, and understanding of the business you are in helps streamline that.

I believe my favorite quote would be "I want to be a marginally intelligent monkey in a suit, I'm going to business school" -Futurama (the talking monkey episode where Fry and the monkey go to school together).

Employees could figure things out without managers if it really came down to it, it just wouldn't flow as smooth as having a central point of contact (manager). Managers on the other hand, you could have a company full of them, no work gets done without knowledgeable and productive staff.

Also, if the "bonus" is part of your contract, it is not a bonus, it is part of your pay.

http://dictionary.reference.com/browse/bonus?o=0


RE: Only in America
By Spivonious on 10/22/2008 12:29:10 PM , Rating: 2
Just because it's in a contract doesn't mean it's not a bonus. A bonus is any extra pay that isn't guaranteed to you. Performance-based, for example.


RE: Only in America
By Gzus666 on 10/22/2008 12:36:15 PM , Rating: 2
Right, and if it is in your contract that you receive said "bonus" and cannot be taken away from you, then it does not fall under the definition of bonus. If it is guaranteed by a contract, it becomes your salary. Now if there is something in the contract (I still can't believe they enter into contracts with employees, that is insane) that specifies they get a bonus only if they meet certain criteria, fair enough, it is a bonus.


RE: Only in America
By omnicronx on 10/22/2008 1:49:42 PM , Rating: 2
Lets not dig too deep here, I don't need a dictionary.com reference to know what a bonus is and that this is a basic definition that does not apply to every situation.

A professional sports player for example can have performance bonuses IN their contract. If he/she completes whatever those goals are, he/she is paid that amount.


RE: Only in America
By Gzus666 on 10/22/2008 2:41:08 PM , Rating: 2
Right, and as I posted above you (that you of course didn't read) this exact situation makes it a bonus, cause you have to meet a criteria to get the bonus. Apparently you do need the dictionary. But your right, let's not get caught up in definitions of words or meanings of things, instead let's use made up definitions you happen to apply in a situation to make yourself right.


RE: Only in America
By omnicronx on 10/22/2008 4:45:35 PM , Rating: 1
I read your post, and I am not making up definitions, you are using a very bad source in which is a very generic definition from dictionary.com.

An Agreement that stipulates a bonus hardly ever means that you get a finite amount, what it means is it is still totally based upon your/your companies performance, but they can not take it away from you. Whereas if a company decides to stop giving out bonuses, those who do not have it in their control are shit out of luck. It is not considered part of the salary because you do not receive a finite amount, you could en up with nothing.

I only called out your source because frankly dictionary.com is unrealiable and dubbed down.

Here are other sites listing the business definition of bonus.

Answers.com "Business Dictionary: Bonus

1. Compensation paid to an employee or employees for achieving a particular sales goal or organizational objective. This is above and beyond either a Commission or a Salary. A corporation achieving a 10% increase in profits may distribute part of the earnings as a bonus to its employees.


Merriam Websters Online

something in addition to what is expected or strictly due: as a: money or an equivalent given in addition to an employee's usual compensation


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