Yahoo Confirms 15% Workforce Cut, Focus On Mobile Growth

By | February 3, 2016

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Yahoo ( YHOO ) late Tuesday confirmed it will cut 15% of its workforce and look to sell non-core divisions and assets, such as patents and real estate as part of a strategic plan to return the company to modest-though-accelerating growth in 2017 and 2018. Shares were down almost 6% near noon Wednesday. Yahoo will close five offices — in Dubai, Mexico City, Buenos Aires, Madrid and Milan — with most of the changes expected to take place in Q1. By the end of 2016, Yahoo said it anticipates having about 9,000 employees and fewer than 1,000 contractors, representing a workforce that is 42% smaller than it was in 2012. It expects to save $400 million a year in short-term operating expenses from these cuts. Yahoo employees have been bracing for layoffs since Yahoo hired McKinsey & Co. in November to pave the way for a reorganization and select which business units should stay and go. Yahoo reported having 10,700 employees at the end of Q3, down 14% from Q3 2014. The company’s turnaround plan includes continued investment in what the company calls “Mavens,” Yahoo CEO Marissa Mayer said on the company’s earnings conference call. Mavens refers to Yahoo’s mobile, video, native and social businesses, where its ad revenue is growing. “Our plan involves continued investment in Mavens to counterbalance legacy declines, with a particular emphasis on mobile,” Mayer said on the call. “With Mavens revenue at over $1.6 billion for the year, mobile is the largest contributor, adding over $1 billion, or nearly a quarter of our traffic-driven revenue.” The company said Mavens revenue jumped 45% in 2015, and it expects a 12.5% increase in 2016, to $1.8 billion. Mavens revenue rose 26% in Q4, to $472 million. The Internet company announced its new strategic plan along with the release of Q4 earnings  that met Wall Street expectations and revenue that beat. Yahoo Focus: News, Finance, Sports, Lifestyle Mayer said the Web portal will narrow its focus to “just four areas — news, sports, finance and lifestyle” — in a bid to provide great content, tools and services in those areas. “By focusing on areas where Yahoo is strong and differentiated, we can propel our execution to a new level,” Mayer said. “Yahoo cannot win the hearts and minds of users and advertisers with a complex, fragmented portfolio of products and assets, especially if some no longer meet our aggressive growth goals or distract from growth products,” she said. “A simplified Yahoo will yield better focus, execution and increase shareholder value.” Mayer said Yahoo will “play to our strengths to grow user engagement, particularly in mobile” to drive growth. The company will also “continue to prune our portfolio” of poorly performing products, she said, as well as “size (our) business accordingly.” As part of its reorganization, its consumer products will consist of three global platforms: Search, Mail, and Tumblr, and the four vertical markets of news, sports, finance and lifestyle. For advertisers, Yahoo will be defined by two core offerings: Gemini and BrightRoll. The company also indicated a reverse spinoff of its 15% stake in Chine e-commerce leader  Alibaba Group ( BABA ) — an idea the company had put aside largely on tax concerns — remains a possibility. Yahoo owns a 15% stake in Alibaba, or about 384 million shares. “Separating our Alibaba stake from our operating business continues to be a primary focus, and our most direct path to value maximization,” Yahoo Chairman Maynard Webb said in the company’s release . “In addition to continuing work on the reverse spin, which we’ve discussed previously, we will engage on qualified strategic proposals.” In December, Yahoo had dropped a nearly one-year-old plan to spin off its $31 billion stake in Alibaba. As for its quarterly results, Yahoo said Q4 earnings excluding items plunged 57% from the year-earlier quarter to 13 cents a share, meeting the views of FactSet and of analysts polled by Thomson Reuters. Yahoo said revenue minus traffic acquisition costs — what the company pays other sites to carry its ads — fell 15% to $1.002 billion, but that beat FactSet’s $948.2 million forecast. Yahoo said total revenue in Q4 rose 1.6% to $1.27 billion, where Thomson Reuters had expected $1.19 billion. For Q1, Yahoo is guiding GAAP revenue at $1.005 billion to $1.09 billion, down 17.9% to down 11%. Yahoo stock fell 1.7% in Tuesday’s regular session, to 29.06. Image provided by Shutterstock .   Scalper1 News

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