In a memo sent to employees and reviewed by The Wall Street Journal, Mr. Thompson said he was splitting Yahoo into three main groups: consumer, which oversees the company’s popular media websites as well as its commerce-related, Web search and email services; regions, which he said is accountable for all of Yahoo’s revenues and is broken up into Americas, Europe and Asia divisions that work with the company advertising customers; technology, which will include the data centers and systems that power Yahoo’s Web services as well as its advertising platforms, including Right Media ad exchange, that Yahoo is currently considering selling.
Yahoo Inc., YHOO +0.26% in a long-expected move, began laying off staff Wednesday as the Internet company tries to cut costs and change its focus after years of flat revenue growth and declining use of some of its websites. The company announced cuts of about 2,000 employees, or 14% of its 14,000 work force, but further cuts are expected, said a person familiar with the matter. The layoffs are expected to span Yahoo’s many departments, including its marketing division and product group, which builds and maintains new Yahoo websites and mobile apps.
“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,” Chief Executive Scott Thompson said in a written statement. “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.”
Yahoo expects to reap about $375 million in annual savings from the cuts and to recognize the majority of an estimated $125 million to $145 million pretax cash charge relating to employee severance in its second-quarter results. The company said more information would be provided about its future direction in conjunction with the release of its first-quarter results on April 17.
In our own peer-reviewed research on organizational downsizing, we’ve found that simply reducing headcount is not a successful strategy for improving the bottom line or other positive outcomes. Dan Farber at CNET.com agrees:
This latest layoff, deleting 2,000 people from its ranks and saving $375 million in costs, is the sixth downsizing in the last six years. The workforce reductions that took place under Jerry Yang and Carol Bartz have not led to greater glory. Current CEO Scott Thompson says he is making Yahoo smaller to be stronger, but there is no indication that he will fare much better than his predecessors in returning the legendary company to its former glory.