Print 52 comment(s) - last by Emryse.. on Oct 23 at 7:18 PM

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.

Comments     Threshold

This article is over a month old, voting and posting comments is disabled

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

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.

"I modded down, down, down, and the flames went higher." -- Sven Olsen

Copyright 2016 DailyTech LLC. - RSS Feed | Advertise | About Us | Ethics | FAQ | Terms, Conditions & Privacy Information | Kristopher Kubicki