Yahoo to cut 10% of its workforce

Nov 6, 2008

Yahoo is to cut about 1,500 jobs - 10% of its global workforce - as it tries to restore the company's fortunes in the face of declining profits.

The US internet group made the announcement as it reported a 64% slump in third quarter profits.

Yahoo's net profit for the three months to 30 September totalled $54.3m (£32.5m), compared with $151.3m for the same period last year.

The firm turned down a takeover offer from Microsoft earlier this year.

With Yahoo's latest results worse than market expectations, its revenues rose just 1% from a year earlier to $1.79bn.

Takeover battles

Under the leadership of co-founder and chief executive Jerry Yang, Yahoo has spent much of this year fighting to keep its independence.

Back in January, Microsoft offered to buy the company for $47.5bn, but Yahoo was quick to reject this, saying it undervalued the company.

Microsoft then returned in the early summer, with a joint takeover offer from itself and activist investor Carl Icahn, who owns 5% of Yahoo's shares.

Under the proposal, Microsoft would have bought Yahoo's search engine, while Mr Icahn would have ended up with the rest of the business, but Yahoo angrily rejected the proposal.

Instead Yahoo announced plans to forge an advertising tie-up with larger search engine rival Google, a plan that is continuing to be studied by competition regulators on both sides of the Atlantic.

With falling profits and its second major jobs cut announcement in nine months, analysts say many Yahoo investors will be increasingly angry that the company did not accept Microsoft's $47.5bn offer.

Add the backdrop of the global financial crisis and wider economic slowdown, and it seems highly unlikely that Yahoo could now attract anywhere near that figure.

Pressure on Yang

The troubles at Yahoo will only intensify the pressure on Mr Yang.

In July he and his board had to reach an agreement with Mr Icahn to stop the minority shareholder trying to replace them.

Angry that Yahoo had resisted Microsoft's takeover efforts, Mr Icahn had hoped to force the directors to resign at August's annual general meeting.

Instead Yahoo agreed to give Mr Icahn and two of his nominees places on a newly expanded board.

Mr Yang said the latest job cuts would strengthen the firm.

"I believe getting Yahoo more fit at this time will provide the flexibility necessary for navigating current conditions and strengthen our position for the future," he said.

Source: BBC