Daily Management Review

15% Job Cuts Likely as Yahoo Pursues Spin-off as a Strategic Alternative


02/03/2016




15% Job Cuts Likely as Yahoo Pursues Spin-off as a Strategic Alternative
Even as Yahoo Inc continues with its plan to revamp the business and spin it off, the tech giant said on Tuesday that it would consider "strategic alternatives" for its core Internet business and cut about 15 percent of its workforce.
 
Under growing pressure from impatient shareholders, the announcement is the strongest sign yet that the board and Chief Executive Marissa Mayer may be willing to sell the struggling Internet business - essentially websites, email and online search.
 
In a recent interview to Reuters, Mayer said the while the first priority of the company is the turnaround plan, it will entertain offers as they come.
 
She said that before the 9 to 12-month timeline projected for the spin-off, it is unlikely that the transaction would be completed even if the company receives an offer this year.
 
"We would obviously engage but I think the one thing we're trying to do is set our shareholders' expectations in terms of complexity," Mayer said.
 
The closure of offices in five locations, a paring down of its products, shifting more resources to mobile search, and the sale of some non-strategic assets such as real estate and patents would be included in the planned restructuring of the company that was announced on Tuesday.
 
Yahoo shares were down 1.2 percent after hours indicating that the investors were not immediately impressed. They have now fallen 36 percent over the past 12 months.

"We believe the strategic plan does not fully address the core issues which have destroyed shareholder value - poor capital allocation, bad strategic partnerships, out of control spending and a bloated workforce," said New York-based SpringOwl Asset Management, a shareholder which has called for changes at the company.
 
While Yahoo still runs some of the world's most-read websites, the web pioneer's revenue peaked in 2008 and the company has been unable to keep up in the battle for online advertisers against rival Alphabet Inc's Google and Facebook Inc.  
 
Search, Mail and Tumblr, and four "digital content strongholds" in the form of News, Sports, Finance and Lifestyle are the three major consumer platforms that the company would focus upon in the rejig of its business.
 
While aiming to cut operating costs by $400 million this year, the changes are designed to increase mobile, video, native and social advertising revenue 8 percent to $1.8 billion. The company also aims to generate revenues between $1 billion to $3 billion through sale of assets.
 
A report of a $7 million bill for Yahoo's holiday party was exaggerated by a factor of three, said Mater while dismissing accusations of excessive spending.
 
As the company struggles to keep its market share of online search and display advertising, Yahoo's adjusted quarterly revenue tumbled 15 percent to $1 billion after deducting fees paid to partner websites.
 
After Yahoo abandoned efforts to sell its Alibaba stake, Mayer had proposed in December that Yahoo spin off its main business.
 
While saying that the company would be open to splitting it off depending on market feedback, Mayer added that Yahoo intends to group its stake in Yahoo Japan with the main business.
 
Due to a large write-down to account for the lower value of some units, the company reported a loss of $4.43 billion, or $4.70 per share, in the quarter. In comparison a year earlier, the company had made a net income of $166.3 million, or 17 cents per share.
 
(Source:www.reuters.com) 






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