Yahoo! Inc. CEO Marissa Mayer is expected to announce dramatic cost-cutting plans that include slashing 15% of the firm’s work force, or nearly 1,600 jobs, reports The Wall Street Journal. The plans will be reportedly revealed when Yahoo releases its Q4 2015 results on February 2. According to sources familiar with the matter, the internet firm is also likely to announce the closure of several business units, though no details are known yet. According to Yahoo’s website, it had around 11,000 employees as of June 30, down from 12,500 full-time employees on December 31,2014
Embattled Yahoo looking to assuage investors?
Marissa Mayer, who assumed responsibility as CEO of Yahoo! Inc. in mid-2012, was touted to be a key factor in managing a turnaround for the company. However, most of her decisions have had little effect on the ex-web pioneer’s fortunes at stock markets. Yahoo’s share of US web searches are essentially the same as three years ago, with Google still being the dominant force. The company has also failed to capture online advertising revenues, despite having a customer base of nearly 1bn.
According to analysts at EMarketer Inc, Yahoo! Inc.’s US market share could shrink nearly 3.5% by 2017, compared with 5.1% in 2015. Total revenue is also predicted to drop as much as by 8.2% to $4.04bn in 2015, the steepest decline in seven years. Yahoo, which saw its shares close at $29.57 on February 1, is projected to report revenues below $1bn for the first time in over a decade, when it unveils its earnings report for the fourth quarter on February 2.
The cost-cutting plans are expected to help Mayer fend off demands of activist investors such as Starboard Value by making Yahoo smaller and more profitable, thus making it more attractive to prospective buyers.
In November, Starboard Value had stated in a letter to Yahoo’s board of management that investors had lost all confidence in management and the board, and demanded an overhaul in the top management (implying Mayer and other executives).
‘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,’ said Starboard.
Later on in the month, SpringOwl, another major Yahoo! Inc. shareholder, demanded the company slash more than 80% of its workforce and replace CEO Mayer.
The criticisms were fueled by Yahoo’s u-turn on a decision to offload its stake in Chinese e-commerec company Alibaba Group Holding Ltd in early December, when the firm decided it would instead spin off its core Internet business.
Yahoo’s tech/media identity crisis
A persisting issue with Yahoo! Inc. , which may well be one of the reasons behind its failure to succeed in the technology market, is its failure to clearly identify itself as a media or technology company. It is no secret that the most successful companies in Silicon Valley- Apple Inc. , Alphabet Inc. and Facebook Inc – have a very technology focused culture. This helps create an environment where extremely skilled and motivated people (engineers, mostly) work together to build the best and innovative technology products.
However, Yahoo has never shown the same enthusiasm for hiring technical talent. According to Paul Graham, a well-known Silicon Valley investor who sold his company to Yahoo in 1998, the firm was never clear about its status as a technology company even in the late 1990s.
‘ One of the weirdest things about Yahoo when I went to work there was the way they insisted on calling themselves a ‘media company,’ said Graham.
Though Mayer has made efforts to boost the company’s technical talent by hiring more computer scientists, there is little to suggest that the morale of Yahoo’s programmers has improved.
On the other hand, Mayer has attempted to beef up the ‘media company’ side of Yahoo’s by hiring television news anchor Katie Couric for Yahoo’s news site in 2013, as well as gadget reviewer David Pogue from the New York Times to anchor the company’s relaunched technology news section.
Job cuts follow lawsuit
The announcement of looming job cuts come on the same day that a former Yahoo employee filed a lawsuit in the U.S. District Court in San Jose, California, alleging that the company’s ratings system (on which employees are ranked from 1 to 5) was rigged and triggered fierce competition to the point of violating employment laws.
‘The [reviewing] process was opaque and the employees did not know who was making the final decisions, what numbers were being assigned by whom along the way, or why those numbers were being changed,’ the filing said.