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 layoffs started a month ago. The Sunnyvale, Calif.-based company revealed that it is laying off about 2,000 people, or 14 percent, of the 13,100-person employee base that are no longer considered relevant in Yahoo's long-term plan.
Sources close to Yahoo have told eWEEK that they believe this won't be the full extent of the staffing cutbacks the company will announce this year. That, of course, remains to be seen.
Yahoo estimated that the April 4 layoffs will result in a $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 Yahoo -- smaller, 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 purpose -- putting our users and advertisers first -- and 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 possible--more likely, probable--that Yahoo is tightening its expenses and trimming headcount 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 that $44.6 billion offer from 2008 is now officially a pipe dream, since the company's market cap is 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.
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 Web sites.
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 back 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."
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