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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 Emryse on 10/23/2008 6:36:05 PM , Rating: 1
No, no, no.

I said "specific, concrete examples".

That means "on such and such a day, this specific person on the board made this decision", etc, etc.

You are blaming the board as a whole for events which span much further than their domain of control.

Also, I am not defending *those specific board members*. Jerry Yang does need to go, as I'm sure many other members of the board also need to go.

But in direct opposition to you, I am stating that a company needs to choose the *right* people, and then pay them *very, very, very* well (the same or better than they currently pay their current board) to be the key leaders of their organization.

What you were saying in your initial argument was "just fire from the top down - save the money you're spending on their salaries, and problem solved". (Which is just silly.)

Our disagreement stems from the issue of where the cost cuts in an organization such as in this case should come from.

You said from the top - I said from where the company is not receiving an adequate return on their investment.

We are both in agreement that *any* board member not providing *incredible* value to the org should be fired. Where we stop being in agreement is on *what happens next*.

You basically said "do nothing, just take the money that used to go to that schmuck's salary and use as company cost savings".

I basically said "reinvest that money by hiring a good board member and pay him or her the same or better than you did before".

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