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February 4, 2016

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CEO’s job on the line as Yahoo sheds 1,700 staff

YAHOO is laying off about 1,700 employees and shedding some of its excess baggage in a shake-up likely to determine whether CEO Marissa Mayer can save her own job.

The long-anticipated purge, announced on Tuesday, will jettison about 15 percent of Yahoo’s workforce along with an assortment of services that Mayer decided aren’t worth the time and money that the Internet company has been putting into them.

The cost-cutting is designed to save about US$400 million annually to help offset a steep decline in net revenue this year.

Mayer also hopes to sell some of Yahoo’s patents, real estate and other holdings for US$1 billion to US$3 billion.

Products to be dumped include Yahoo Games, Yahoo TV and some of the digital magazines that Mayer started as CEO. She will also close offices in Dubai, Mexico City, Buenos Aires, Madrid and Milan.

In an apparent concession to frustrated shareholders, Mayer also said Yahoo’s board will mull “strategic alternatives” that could result in the sale of all the company’s Internet operations. Analysts have speculated that Verizon, AT&T and Comcast might be interested in buying Yahoo’s main business, despite years of deterioration.

Mayer expressed confidence that her plan to run Yahoo as a smaller, more focused company “will dramatically brighten our future and improve our competitiveness, and attractiveness to users, advertisers, and partners.”

Shareholders have questioned whether she has figured out how to revive the Internet company’s growth after three-and-half years of futility. Yahoo’s stock shed 34 cents to US$28.72 in extended trading after details of Mayer’s latest turnaround attempt came out. The stock has fallen by more than 40 percent since the end of 2014 as investors’ confidence in Mayer has faded.

“The investment community has given up on this becoming a resurrection story,” said Douglas Melsheimer, managing director of Bulger Partners, a technology banking and consulting firm.

“At this point, it needs to be managed for maintenance or very slow growth. Marissa is more of a visionary whose background lends itself to a more ambitious strategy. I don’t think she is the one to navigate the company through job cuts or a restructuring.”

Ken Goldman, Yahoo’s chief financial officer, said he got a “neutral” reaction after talking to some investors following Mayer’s presentation. He also acknowledged that both Mayer and he had made some mistakes that they are now trying to correct with this overhaul.

“None of us are perfect in all of our decision making, but I feel good about the plan that we put in place and believe it’s the right one,” Goldman said.

Some of Yahoo’s most outspoken shareholders, such as SpringOwl Asset Management, already have concluded that Mayer should be laid off, too.

Mayer, a former rising star at Google who helped that company eclipse Yahoo, defended her performance.

“Yahoo is a far stronger, more modern company that it was three-and-half years ago,” she said in a video presentation on Tuesday.

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