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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 Ringold on 10/22/2008 8:08:36 PM , Rating: 1
quote:
Management, on the other hand, consumes from the bottom line.


Wrong.

quote:
Cut the management perks, trips, BONUSES (wipe them out - management should ALWAYS cut their bonuses completely before ever, ever making a single cut to employee bonuses) and salary.


Half way there.

In other words, I don't have a problem with pay matching performance. But the rhetoric against management here is just plain stupid. Jerry Yang obviously should be fired; some shareholders tried to make it happen, but failed. But to say they simply "consume" from the bottom line is just wrong. There's a reason why Goldman Sach's survived when Lehman Brothers was run in to the ground. There's a reason why Google is doing relatively well while Yahoo is failing. There is a reason why some airlines fail and others succeed. While the men in the trenches have something to do with it, the common component to all the above is superior management. The management at Goldman Sachs, for example, deserve whatever silly-large paycheck they receive in my opinion as a GS shareholder, because they saw a lot of this chaos coming and profited when their counterparts were collapsing. Yang, on the other hand, should've been fired long ago at this point.

Many of the comments about management make it sound like they're useless dredges. As if it is the privates who win wars, not generals. I'm sorry. Boys on the front line are essential, but they're myopic, they see generally only whats in front of them, the task at hand. They can fight heroically, but it comes down to if the generals have positioned them properly.

Also, skilled management is harder to find than a dime-a-dozen college grad to fill the lower ranks; companies spend a lot of time and money recruiting experienced executives. So no, cutting their pay and getting experienced exec's out the door before first cutting labor near the bottom is not always necessarily the best idea.

Even when pay is set to equal performance though, I'll point out that doesn't equate to success. Dick Fuld and hundreds of Lehman's employees had their life tied up in LEH stock and stock options. That didn't save them from screwing up big time.


RE: Only in America
By xsilver on 10/22/2008 10:21:40 PM , Rating: 2
somewhat true - but when the battle is going tits up maybe it would be a good idea for the generals to stop ordering caviar from moscow rather than cutting rations from the men.

Reward the general when he's winning the battle not when he's sending waves of men into machine gun fire.


"Young lady, in this house we obey the laws of thermodynamics!" -- Homer Simpson














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