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Sunnyvale, California-based Internet portal and search engine company Yahoo will cut 1,000  jobs by mid-February amidst sharply dropping profits in a move co-founder and chief executive Jerry Yang says is "not tinkering around the edges," the company announced Tuesday. Coming alongside fourth quarter earnings that saw profit at the world's top Internet destination decline by 23 percent, Yahoo painted a disappointing forecast for 2008 as it struggles to contend with online search and advertising giant Google. Yahoo Shares Lower The layoffs are expected to affect mostly non-technical positions and represent about 7 percent of Yahoo's 14,300 workers. Yahoo said that some of the those let go may apply for new positions in several areas it expects to aggressively invest in, such as advertising technology and certain areas of its Web portal, making it difficult to determine how the layoffs will ultimately affect company employee totals. The announcements, which were made after the markets closed Tuesday in a conference call and which had been expected, drove Yahoo's after-hours trading shares down more than 10 percent, to values not seen since 2005. The job cuts come as Web pioneer Yahoo seeks to cut costs and breathe new life into recovery plans Yang announced recently that will see it narrowing its focus to three key goals: becoming the top "starting point" for Web users, gaining popularity and profit from the online advertising market, and embracing more open standards to woo third-party software developers and publishers. "Headwinds" Forecast Yang spoke to investors about "headwinds" Yahoo will face during 2008, and said in a statement that this is an important time for the firm he co-founded with David Filo while both were students at Palo Alto, California's Stanford University. "This is a pivotal time for Yahoo's business and we have a unique window of opportunity right now to make the necessary, game-changing investments," Yang said. The illustrations below, provided by Yahoo along with its earnings report (.PDF file), show fourth quarter figures.  Tuesday's revenue growth and profitability forecasts from Yahoo were not as strong as some analysts, who have become increasingly anxious about the company and impatient for change, had planned for, however Yahoo did say its forecasts are for the most part separate from the economic downturn the United States is facing.  Earnings Statement Overview The fourth quarter saw Yahoo's net income falling by 23 percent to $205.7 million from $268.7 million a year earlier, a drop of four cents per share attributed largely to slower advertising spending than had been expected in the retail, travel and financial categories. Company sales climbed during the same quarter the previous year, an 8 percent increase from $1.7 billion to $1.83 billion, as shown in the illustrations below, provided by Yahoo along with its earnings report.  Taking into account commissions paid to certain partners in its online advertising project, Yahoo, which has offices in Santa Monica, California, New York and other cities, saw revenue of $1.4 billion, as analysts had predicted, and expects to see revenue for 2008 reach between $5.35 billion and $5.95 billion.  Restructuring Plan While Yahoo Web properties attract nearly half a billion visits each month, it has lost a sizable share of the online advertising market, which has led to cutbacks in certain areas including the firm's generally unsuccessful social networking Web site Yahoo 360, and several other Yahoo endeavors in the auction, photo and premium music markets, along with a short-lived Web entertainment project known as "worlds". Yahoo hopes to shift its energies to areas it considers most important, including the Yahoo portal Web site, MyYahoo with its personalized homepage services, and key search, Web mail, news, sports and finance properties.  Yahoo's president Susan Decker has said that in order to improve efficiency, new investments in search technology and online advertising have begun. The past year has seen Yahoo's share of the search market drop from 21 percent to 17 percent, according to figures from Web traffic analysis firm comScore. "We've seen a solid start to the year - at the same time, we're obviously watching economic developments very closely," Decker said. Swift Reaction to Layoffs Among members of the popular online discussion forums operated by WebmasterWorld, a community of primarily technically savvy webmasters and search engine marketing (SEM) professionals founded by chief executive Brett Tabke, reaction to Yahoo's earnings statement and layoff news was mixed. "I think the most interesting statistic from the earnings call was that revenue from third-party publishers (read Yahoo Publisher Network) was down 20 percent," wrote one WebmasterWorld member using the handle "stajer," who suspects that some of Yahoo's decreased revenue may be due to rival Google. "That is people dropping YPN for other programs, perhaps AdSense," the member added, referring to Google's popular contextual advertising program.  Yahoo, Facing "Headwinds," Trims 1,000 Jobs Amidst Declining Profits Faced with increasing competition from Google and social networking sites MySpace and Facebook, which combine to consume more time consumers could be spending at Yahoo, Yang's company appears ready to embark on a new strategy. "We are making significant, and what we believe are game-changing, investments in Yahoo's future," Yang said, adding that Yahoo is "making profound, fundamental changes to virtually all aspects of our business." The layoffs announced Tuesday, which chief financial officer Blake Jorgensen termed a "realignment," are the first Yahoo has had since 2001. What effect the layoffs and decision to narrow its focus will have on Yahoo's future remains to be seen, however Yang seems guardedly optimistic. "We are confident we are headed in the right direction," said Yang. Related Links:
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10:09 pm on Jan. 30, 2008 (utc 0)
