New chief axes 2,000 jobs as Yahoo seeks to rebuild its fortunes

By ERIKKA ASKELAND
Published on 05/04/2012 00:00

Yahoo is cutting 2,000 jobs as new chief executive Scott Thompson clears out areas that do not fit into his plans for turning around the beleaguered internet company.

The widely-expected cuts represent about 14 per cent of the 14,100 workers employed by Yahoo. The company estimated it would save about $375 million (£236.2m) annually after the layoffs are completed later this year.

The house-cleaning marks Yahoo’s sixth mass layoff in the past four years under three chief executives.

This one will inflict the deepest cuts yet, eclipsing a cost-cutting spree that laid off 1,500 workers in late 2008 as the group tried to cope with the recession.

The previous purges under Yahoo co-founder Jerry Yang and his successor, Carol Bartz, boosted earnings. But trimming the payroll did not reverse a revenue slump, which has disillusioned investors at the same time as more advertising flows to the internet.

The cuts are part of an overhaul aimed at focusing on what Thompson believes are Yahoo’s strengths, while also trying to address its weaknesses in the increasingly important mobile computing market.

He is betting Yahoo will be able to sell more advertising if it is more astute in the analysis of the personal information that it collects from the roughly 700 million people who visit its website each month. He is also looking for ways to improve the products it makes for smartphones and tablet computers, a goal that may require hiring more specialists in mobile technology.

Thompson, who took the helm of the company in January, said: “Today’s actions are an important next step toward a bold, new Yahoo – smaller, nimbler, more profitable and better equipped to innovate as fast as our customers and our industry require.

“Our goal is to get back to our core purpose – putting our users and advertisers first – and we are moving aggressively to achieve that goal.”

Some analysts were sceptical about the layoffs. “You can’t cut your way to revenue growth,” said Colin Gillis of BGC Partners. “What people want to see out of Yahoo is a plan and provision for revenue growth.”

But at Macquarie Research, Ben Schachter saw the job cuts as a start in determining the new direction of the company.

“Scott Thompson is not there to tweak the business,” Schachter said. “He saw something in the assets to make him think there was potential.”

The layoffs follow Yahoo’s declining revenue due to competition from web rivals Google and Facebook.

Last year, Yahoo’s revenue totalled $4.98 billion, compared with Facebook’s $3.71bn. Facebook has 3,200 employees, compared with Yahoo’s 14,000.

Yahoo UK and Ireland has offices in London and Dublin, although in 2008 it was reported to have moved its headquarters to the tax-haven of Zug in Switzerland.