New Yahoo CEO Scott Thompson on April 4 started some of the dirty work he was hired in January to do: trim back the company to its essentials, so it can conserve revenue and grow back in a new, more profitable way in the Web services business.
Rumors of the cuts started a month ago. The Sunnyvale, Calif.-based company revealed that it is laying off about 2,000 people, amounting to 14 percent, of the 13,100-person employee base who are no longer considered relevant in Yahoos long-term plan.
Sources close to Yahoo have told eWEEK that they believe this won't be the full extent of the staffing cuts the company will announce this year. That, of course, remains to be seen.
Yahoo estimated that the April 4 layoffs will result in $125 million to $145 million in charges and will save the company in the neighborhood of $375 million annually.
'A Bold, New Yahoo' Coming?
"Today's actions are an important next step toward a bold, new Yahoosmaller, nimbler, more profitable and better equipped to innovate as fast as our customers and our industry require," Thompson in a statement to the press. "We are intensifying our efforts on our core businesses and redeploying resources to our most urgent priorities.
"Our goal is to get back to our core purposeputting our users and advertisers firstand we are moving aggressively to achieve that goal."
Only three weeks ago, Thompson had circulated a memo within the company, saying that "real change is coming." As is common in many corporate layoff scenarios, the layoffs first will impact marketing/public relations and research operations. Next up for pink slips will be Yahoo's large products organization, marginal smaller divisions and weaker regional groups.
It is possiblemore likely, probablethat Yahoo is tightening its expenses and trimming head count in order to make it more attractive to a potential buyer. It's still possible that Microsoft, which licenses Yahoo's IT for its Bing search engine, could be interested. But Microsoft's well-chronicled $44.6 billion offer from 2008 is now officially a pipe dream, since Yahoo's market cap is now estimated at $17.75 billion.
Yahoo's common stock in July 2008 was selling for about $23 per share and had been as high as $33.63 in October 2007. The stock was selling at $15.04 on April 4.
Corporate Confidence a Serious Issue
Confidence is a major ingredient lacking in the company makeup at this time. Since 2007, the company has had four CEOs: former Warner Bros. Chairman and co-CEO Terry Semel (2004-2007), co-founder Jerry Yang (2007-2009), Carol Bartz (2009-2011) and now Thompson.
Yahoo has long been considered the most popular home page in the world, and its email and news features are extremely popular and well-used.
For about seven years, Yahoo ranked as the world's No. 1 Internet search engine. However, Google bypassed it in general usage in about 2002. Facebook, Twitter and other social media services also have taken page views from Yahoo, which is still the No. 3 search provider (the new No. 2 is Microsoft Bing) and whose Yahoo Mail is the world's leading Webmail application.
Yahoo's search engine never has been able to work as quickly or as efficiently as Google's, and it has paid a steep price for being surpassed. It also has not been able to get as much traction as Google and other Web service providers on features such as Web documents, collaboration tools, calendaring, texting and others.
Facebook Files Countersuit April 3
It hasn't been an altogether great week for the powerful Web search and services provider. Facebook said April 3 that it has filed a countersuit against Yahoo, claiming that Yahoo violates Facebook patents that relate to photo-sharing, the news feed, tagging digital media and other Web elements that build in social features in Websites.
Facebook general counsel Ted Ullyot said that the case is in response to Yahoo's decision to sue Facebook on March 12.
Yahoo's litigation pertains to 10 patents that include methods and systems for advertising on the Web, the first major legal battle among big technology companies in social media. No dollar amounts were mentioned.
Yahoo had threatened this move on Feb. 28 before it pulled the trigger March 12. The company said it is seeking licensing fees from Facebook over its patents and that other companies have already agreed to such licensing deals.
In the lawsuit, Yahoo claims that Facebook was considered "one of the worst-performing sites for advertising" prior to adapting Yahoo's ideas. "Mr. Mark Zuckerberg, Facebook's founder and CEO, has conceded that the design of Facebook is not novel and is based on the ideas of others," the lawsuit said. In a statement to Reuters, Yahoo said it is confident it will prevail. "Unfortunately, the matter with Facebook remains unresolved and we are compelled to seek redress in federal court."
Chris Preimesberger is eWEEK's Editor in Chief of Features and Analysis. Twitter: editingwhiz