Yahoo Laying Off 15% of Workforce, Says It’s Exploring Sale Options

Marissa Mayer Yahoo TV Production failure
AP Photo/Eric Risberg

Yahoo said it will cut 15% of its workforce, or around 1,600 jobs, and the flagging Internet company officially put itself on the block by announcing that it is exploring “strategic alternatives.”

The company made the announcements in reporting financial results for the fourth quarter of 2015 that beat analyst projections for top-line revenue — although net revenue declined 15% year over year. Yahoo posted quarterly revenue of $1.27 billion (versus $1.18 billion in the year-earlier period) and adjusted earnings per share of 13 cents (compared with 30 cents). Wall Street had expected revenue of $1.19 billion and EPS of 13 cents, per Thomson Reuters.

“This is a strong plan calling for bold shifts in products and in resources,” CEO Marissa Mayer said in a statement. “The plan announced today builds from that achievement and will dramatically brighten our future and improve our competitiveness, and attractiveness to users, advertisers and partners.”

For consumer products, Yahoo will focus on three platforms globally: Search, with an emphasis on mobile search; Mail; and Tumblr. It will pare down to four vertical segments — News, Sports, Finance and Lifestyle — in “growth markets” like the U.S., Canada, the U.K., Germany, Hong Kong and Taiwan.

As part of its cost-cutting measures, Yahoo said it plans to reduce its workforce by roughly 15% and shut down five offices (in Dubai, Mexico City, Buenos Aires, Madrid and Milan). The company said it expects most of the restructuring changes will take place in Q1. By the end of 2016, the company expects to have approximately 9,000 employees and fewer than 1,000 contractors — a workforce 42% smaller than it was in 2012, when Mayer took the CEO job. The cuts will result in savings in short term operating expense of $400 million annually, according to the company.

“Yahoo does not take this decision lightly and will make every effort to handle the process with thoughtfulness, transparency and compassion,” the company said.

Potential suitors for Yahoo’s Internet businesses include Verizon Communications, which acquired AOL for $4.4 billion last year. Others, including News Corp and private-equity firm TPG Capital, have expressed an interest in Yahoo’s assets as well, the Wall Street Journal reported citing anonymous sources.

Yahoo chairman Maynard Webb said in a statement that “in addition to continuing work on the reverse spin, which we’ve discussed previously, we will engage on qualified strategic proposals.”

In December, Yahoo abandoned plans to spin off its stake in Chinese e-commerce giant Alibaba Group and announced that it would instead do a reverse spinoff of its other assets, putting those businesses into a separate, publicly traded company.

Mayer has been under mounting pressure from investors, including most notably Starboard Value, to sell or spin off Yahoo’s legacy businesses. Starboard also has called for the board to install a new management team citing Yahoo’s deteriorating financial performance under Mayer, a former top exec at Google.

For the fourth quarter of 2015, Yahoo took a $4.46 billion “goodwill impairment charge,” saying the company concluded that the carrying value of U.S., Canada, Europe, Latin America and Tumblr reporting units “exceeded their respective estimated fair values.” That included a $230 million charge for Tumblr, which Yahoo bought in 2013 for $1.1 billion. With the goodwill charge, Yahoo swung to a net loss of $4.44 billion in the quarter, or $4.70 per share, versus net income of $166 million for Q4 2014.

Yahoo’s steps to streamline operations have included shutting down Yahoo Screen, the video service that was the home to licensed programming and originals including the sixth season of “Community” from Sony Pictures Television.

On Tuesday Yahoo said that in 2016 it will consolidate some digital magazines under one of its four core verticals (news, sports, finance and lifestyle) and will shut others down. The company also will exit its Games and Smart TV businesses, “which have not met growth expectations,” Yahoo said.

In addition, Yahoo is exploring the divestiture of “non-strategic assets” such as non-strategic patents and real estate. Through the end of 2016, the company estimates those efforts could generate between $1 billion and $3 billion in cash.

Yahoo’s Q4 2015 net search revenue (subtracting traffic acquisition costs) was $381 million, a decline of 18%. Net display advertising revenue was $472 million, up 2% from the year prior, as traffic-acquisition costs nearly doubled to $130 million.

The company touted growth of its “Mavens” businesses (mobile, video, native and social), which generated $472 million in revenue for the fourth quarter of 2015, a year-over-year increase of 26%. Yahoo projects Mavens growing to $1.8 billion this year, up from $1.66 billion in 2015.

Mayer, in her prepared remarks on the company’s call with investors, took time to complain about news reports alleging Yahoo spends lavishly on perks and parties for employees, including the claims that it has paid $450 million on free food over four years and $7 million for a holiday party. Mayer said those figures were off by a factor of “more than three.”

Yahoo’s outlook for 2016 was below Wall Street expectations. For the first quarter of 2016, the company expects revenue to be $1.05 billion to $1.09 billion, with an adjusted operating loss of $30 million to $50 million, CFO Ken Goldman said on the call. The company is forecasting full-year 2016 revenue of $4.4 billion to $4.6 billion (versus $4.97 billion in 2015) and adjusted operating income of $150 million to $250 million. Excluding traffic-acquisition costs, Yahoo expects revenue of $3.4 billion to $3.5 billion for 2016 (down 15%-17% from $4.1 billion in 2015).

In a regulatory filing Tuesday, Yahoo disclosed that Charles Schwab, chairman of the Charles Schwab Corp., resigned from the company’s board effective Feb. 2 “due to his other professional commitments and demands on his time.” He was named to Yahoo’s board in April 2014 and was seen as a Mayer ally. Activist investor Starboard has previously said it plans to nominate a slate of new directors prior to the March 26 proxy-filing deadline.

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  1. John says:

    Yahoo’s biggest mistake was making too many updates on its website. The early Yahoo main page was simple and easily accessible, much more user friendly. Now the Yahoo main page is nothing but endless scrolling down of unimportant news articles that no one cares about. I remembered before IMDB came along, Yahoo used to be the top website people visit to get movie information, trailers, and posting movie comments, until they stopped showing trailers and lost tens of millions of visitors each day, big mistake. Yahoo also used to be the main site for TV listing, until they stopped doing it, another big mistake. Now the new feature is when you click on a news article Yahoo gives you this stupid blank page within a page, that just discourage readers from even wanting to read the article.

    The irony is Yahoo! Japan has kept its website in the original format and layout from the early 2000’s, everything is just simple and easy to read, and guess what’s the most popular website in Japan? Yes, its Yahoo! Japan.

    Yahoo committed the worst mistake for a successful website, if it ain’t broken, don’t fix it. Yahoo is like one of those women that had too many plastic surgeries on her face, turning a once naturally beautiful look into a unrecognizable monster.

  2. Yahoo!®Is-A-Wonderland... says:

    Marissa Mayer is WAITING ON THE WORLD TO CHANGE! Here’s Johnny who shares the same Surname!

  3. Liberal but sick of the feel-good b.s. says:

    Maybe we can all take a break from our new American pasttime of proclaiming everyone a hero and buying their books until they PROVE themselves. Just because a CEO, athlete or artist is a woman or a person of color does not mean that they are incredible role models to be held up for struggling youngsters and given American Express ads and Annie Leibowitz photo shoots. How about we wait and see what they do, first? I’m not saying this to infer that we should not give women CEO jobs or Marissa Mayer shows that all women can’t do it; that would be ridiculous. I’m just saying that I’m sick of our hero culture. Marissa Mayer should have been applauded for doing a great job, not just getting the job. Unfortunately, she hasn’t achieved the former. I hope she can still turn it around.

    Let’s give the trophies to the winners, not all of the participants.

  4. Chris says:

    AOL. Yahoo. So old and stale. (When was the last time you had an AOL account? Or a yahoo email address?) Consumers pretty much moved on from these two ten years ago.

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