Yahoo to announce job cuts as investor pressure mounts
02 Feb 2016
Embattled internet pioneer Yahoo will announce job cuts when it releases its quarterly earnings report today, according to a report in The Wall Street Journal.
Yahoo chief executive Marissa Mayer will lay out a cost-cutting plan that includes chopping 15 per cent of the work force, an estimate 1,600 positions, the Journal said citing unnamed people close to the matter. The cuts would come as a key investor in Yahoo pressures the board of directors for a management change.
Mayer, who has overseen falling sales in 7 of the past 10 quarters, has promised to detail a plan to cut costs and boost growth.
Activist hedge fund Starboard Value last month said investors appear to "have lost all confidence in management and the board" since the company, led by Silicon Valley star Mayer, has failed to turn around Yahoo's core internet business.
In a letter to the board, Starboard said Yahoo needs to sell off the core business to other investors, but that so far the company has ignored expressions of interest from buyers. Starboard argued that "significant changes are desperately needed".
In December, SpringOwl, another sizeable Yahoo investor, demanded the company cut more than 80 per cent of its workforce and replace chief executive Mayer.
The criticisms come after Yahoo reversed course in early December and decided not to sell off its lucrative stake in China's Alibaba and instead spin off its core internet business. Investors such as Starboard point out that current market valuations of the company put the value of the core business at zero, and that selling it would reap far more for investors than keeping the business.
"Despite over three years of effort and billions spent on acquisitions, the management team that was hired to turn around the core business has failed to produce acceptable results, in turn causing massive declines in profitability and cash flow," Starboard said.
Other disgruntled shareholders have voiced their frustration, including Canyon Capital Advisors, which said Yahoo needs to prioritise the sale of some assets, the Web operations or the entire business.
Although Mayer and the board downplayed any drastic scenarios last year, they may be warming up those possibilities. Yahoo is considering an outright sale of its business, people familiar with the matter said last month. The company may need another new plan in the face of an expected proxy fight, said the people, who asked not to identified because a final decision hasn't been made.
Word of looming job cuts came on the same day that a fired Yahoo employee filed a lawsuit in federal court in Silicon Valley arguing that the company's job performance evaluation system is discriminatory and violates the law.
Once a major gateway to information, communities and entertainment on the internet, Yahoo has in recent years been ditched in favour of Google, Facebook Inc and other companies at the centre of people's digital lives.
While boasting more than 1 billion users, Yahoo has struggled to keep pace with growth in online advertising, with Yahoo's share of the US market projected to shrink to 3.5 per cent in 2017 from 5.1 per cent in 2014, according to EMarketer Inc.
Analysts project 2015 revenue, minus sales passed on to partners, will fall 8.2 per cent to $4.04 billion, its biggest decline since 2009.
