Yahoo to Unveil Cost-Cutting Plan
February 01 2016 - 12:40PM
Dow Jones News
Marissa Mayer introduced herself as Yahoo Inc.'s chief executive
on an earnings call in October 2012, saying she took the job "to
grow and to help redefine one of the Internet's most beloved
companies."
That growth never happened. Thirteen earnings calls later, Ms.
Mayer on Tuesday plans to shift her focus from taking market share
to making drastic cuts.
Ms. Mayer is expected to appear on video with Chief Financial
Officer Ken Goldman after Yahoo announces fourth-quarter earnings
to unveil a plan aimed at slashing the Internet company's costs,
including the closing of several business units and a reduction of
up to 15% of its workforce, said people familiar with the
matter.
Making Yahoo smaller and more profitable could help Ms. Mayer
buy time with investors and bolster her case in a possible proxy
fight with Starboard Value LP. The activist hedge fund has called
for new management and a sale of the business while threatening to
nominate a slate of directors by the March 26 deadline.
Ms. Mayer said in October she was preparing to narrow the
company's focus on fewer areas, without providing more detail.
Since then, the company has rattled investors by shelving a plan to
spin off shares in Alibaba Group Holding Ltd. and failing to
explore a sale of the business.
Though potential suitors have already expressed interest,
Yahoo's board has put off any serious talks for now, people
familiar with the matter said.
Executives at Verizon Communications Inc. have publicly
expressed interest in buying Yahoo. The wireless carrier may seek
to combine Yahoo's online advertising and media assets with those
of AOL Inc., which it purchased last year for $4.4 billion.
If nothing else, a round of cost-cutting could make Yahoo more
attractive to a potential buyer.
Yahoo's expenses have risen while revenue has declined in the
three-and-a-half years since Ms. Mayer took the reins. In the first
nine months of 2015, operating expenses totaled $3.9 billion, up
20% from the same period in 2014. During that same time, revenue
excluding commissions paid to search partners dropped 4% to $3.09
billion.
A large part of the recent increase in expenses is owed to
costly deals Ms. Mayer struck with Mozilla Corp. and Oracle Corp.
to provide traffic to Yahoo's search engine.
Ms. Mayer has lowered head count to 10,700 employees in the most
recent quarter, down from the company's peak of about 14,000 before
she started in 2012. The CEO cut 1,800 employees in the first nine
months of last year, mostly workers in offices outside the U.S.,
including China, India and Canada.
But Yahoo's organization is still massive compared with the size
of its business. In the first nine months of last year, Yahoo
generated an average $345,000 in revenue from each employee, lower
than Twitter Inc., which made about $359,000 per employee during
that period; Alphabet Inc., with $895,000 per employee; and
Facebook Inc., with just over $1 million in sales per employee.
Analysts expect Yahoo's earnings before interest, taxes,
depreciation and amortization of $900 million in 2015, which would
be the first time that annual figure has fallen below $1 billion in
at least six years. Revenue for the fourth quarter is projected to
rise to $1.19 billion, an increase of less than 1% from a year
earlier.
Last week, Yahoo cut at least five managers who were working on
Brightroll, the video ad service it acquired in 2014, according to
a person familiar with the matter. Other employees said they were
waiting nervously for news of who would be cut or what areas of the
company would be shut down.
Ms. Mayer is expected to announce greater focus on Project
Index, an internal project to build a better search engine tailored
to mobile phones, said a person familiar with the matter. The
company has posted listings for at least 190 jobs on its website
this month, the vast majority of which are for engineers.
Ryan Knutson contributed to this article.
Write to Douglas MacMillan at douglas.macmillan@wsj.com
(END) Dow Jones Newswires
February 01, 2016 12:25 ET (17:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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