Yahoo cuts 1,500 workers
Company going into ‘recession mode’; other high-tech businesses slashing too
SAN FRANCISCO – Yahoo Inc. will fire at least 1,500 workers to cope with a crumbling economy that dented its third-quarter profit and turned up the heat on the slumping Internet company’s management as investors stew over a missed opportunity to sell to Microsoft Corp. for $47.5 billion.
The purge outlined Tuesday represents a 10 percent reduction in Yahoo’s payroll of about 15,000 employees. It’s the second time in nine months that Yahoo has resorted to mass layoffs in what so far has been an ineffectual effort to rebound from a financial funk that has left its stock price near a 5 ½-year low.
Yahoo’s housecleaning, to be completed by the end of the year, provides the latest example of how a credit crisis that has already rocked banks and retailers is starting to rattle Silicon Valley, the nation’s high-tech heartland.
Online auctioneer eBay Inc. is jettisoning 1,600 jobs while an array of startups are letting go workers to squirrel away more cash as venture capitalists become more cautious with their money. Even Google Inc., a company renowned for its free-spending ways, is starting to cut corners.
“We are going into what is very clearly a recession mode,” Blake Jorgensen, Yahoo’s chief financial officer, said in a Tuesday interview.
Yahoo felt the squeeze in the third quarter as the Sunnyvale, Calif.-based company earned $54.3 million, or 4 cents per share. That was a plunge of 64 percent from $151.3 million, or 11 cents per share, at the same time last year.
If not for nearly $67 million in one-time expenses and a slightly higher tax rate, Yahoo said it would have made 9 cents per share. That figure matched the average earnings estimate among analysts surveyed by Thomson Reuters.
Revenue rose 1 percent to $1.79 billion. After subtracting commissions to advertising partners, Yahoo said revenue stood at $1.32 billion – about $50 million below analyst estimates.
Yahoo’s determination to rein in its expenses seemed to please investors, who have been disillusioned with the company’s direction for years.
Yahoo shares gained nearly 7.6 percent in extended trading after ending the regular session at $12.07, down 79 cents.
The depressed stock price is particularly galling to Yahoo stockholders, given that Yahoo had a chance to sell to Microsoft for $33 per share in May.
But Microsoft withdrew its offer after Yahoo Chief Executive Jerry Yang balked at the price, arguing his turnaround plan would yield even bigger returns.
Yang’s rebuff is now looking like a horrible mistake as online advertisers curtail their spending in anticipation of the worst recession in a quarter century.
Signaling it expects the turbulence to extend well into 2009, Yahoo plans to trim $400 million from its annual expenses of $3.9 billion before January.
“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,” Yang told analysts during a Tuesday conference call.
Besides pruning its payroll, Yahoo is considering closing some of its U.S. offices and sending some work to lower-paid workers overseas.
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