Yahoo Inc’s leaders still have jobs despite investor misgivings about their decision making, but at least 1,500 workers will be laid off after the slumping Internet company’s profits tumbled yet again in the third quarter.
The 10 percent reduction in Yahoo’s payroll of 15,000 employees served as another stark reminder of the challenges facing a management team led by CEO Jerry Yang (楊致遠) as the deteriorating economy casts even more doubts about the Sunnyvale, California-based company’s turnaround plans.
Although Yahoo’s third-quarter profit plunged 64 percent, the cutbacks announced on Tuesday are a small step in the right direction, Cantor Fitzgerald analyst Derek Brown said.
PHOTO: AP
“But it seems like there is still a lot more work that needs to be done,” he said.
Yahoo is bracing for a deep downturn likely to extend well into 2009 by trimming US$400 million from its annual expenses of US$3.9 billion. Besides shedding 1,500 workers during the next two months, Yahoo may close some of its US offices and assign more jobs to lower-paid contractors in other countries.
“We are going into what is very clearly a recession mode,” Yahoo chief financial officer Blake Jorgensen said in an interview on Tuesday.
Yahoo’s determination to rein in its expenses seemed to please investors, who have been disillusioned with the company’s direction for years.
The company’s shares gained almost 7 percent on Tuesday in extended trading after ending the regular session at US$12.07, down US$0.79.
Yahoo’s house-cleaning 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.
Yahoo felt the squeeze in the third quarter as its earnings dwindled to US$54.3 million, or US$0.04 per share. That was down from US$151.3 million, or US$0.11 per share, at the same time last year.
Revenue was up 1 percent to US$1.79 billion. After subtracting commissions paid to advertising partners, Yahoo said revenue stood at US$1.32 billion — about US$50 million below analyst estimates.
Analysts have blamed much of Yahoo’s past troubles to mismanagement, but the crumbling economy is now looming as the company’s biggest headache as online advertisers curtail their spending in anticipation of the worst recession in a quarter century.
Like most Internet companies, Yahoo relies on advertising for most of its profits.
Reflecting the downturn, Yahoo lowered its revenue estimates for the remainder of the year. Now Yahoo projects this year’s revenues will be US$7.18 billion to US$7.38 billion — down from a forecast of US$7.35 billion to US$7.85 billion three months ago.
But the turmoil has not derailed Google, which last week reported a 26 percent increase in its third-quarter profit.
Yahoo is more vulnerable to advertising cutbacks because its marketing system does not work as well as Google’s and it is more reliant on billboard-type ads. Google, in contrast, specializes in text-based ad links that cost advertisers only when the ads are clicked.
Yahoo hopes to boost its revenue by drawing upon Google’s technology for some text ads.
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