Yahoo to Cut 15% of Workforce -- 4th Update
February 02 2016 - 8:26PM
Dow Jones News
By Douglas MacMillan and Dana Mattioli
Yahoo Inc. on Tuesday gave its strongest indication yet that the
company's board is considering a sale of its Web properties,
signaling the possible end of a 20-year run by an Internet
icon.
The company said it would explore "strategic alternatives" as
part of a restructuring that will eliminate roughly 15% of its
workforce. The announcement came alongside a dismal fourth-quarter
report card in which Yahoo took a $4.5 billion charge to write down
the value of businesses including its Tumblr blogging site.
Yahoo's move to weight its options sets the stage for a possible
bidding war between a wide range of potential buyers. About 1
billion people a month travel collectively to Yahoo's home page,
email and other sites, making them an attractive asset to media
conglomerates such as Wall Street Journal owner News Corp and
IAC/InterActiveCorp, telecom giants including Verizon
Communications Inc. and private-equity firm TPG--all of which have
expressed interest in purchasing parts or all of the business,
people familiar with the matter said.
A sale process would also likely mark the end of Chief Executive
Marissa Mayer's attempt to turn around Yahoo. Costs have risen,
while revenue has shrunk in the 3 1/2 years since she took the
reins. Fourth-quarter revenue excluding commissions paid to retail
partners was about $1 billion, down 15% from a year ago and the
lowest point during Ms. Mayer's tenure.
Her efforts were complicated in recent months by an exodus of
top managers and growing impatience from investors, including
hedge-fund activist Starboard Value LP, who has called for new
leadership and a sale of the company.
Yahoo's efforts did little to appease some shareholders
including SpringOwl Asset Management LLC, which last month
recommended the company cut up to 75% of staff and bring in a more
operations-focused CEO.
"This is a company that has clearly suffered from a lack of
focus," said Eric Jackson, managing director at SpringOwl. "We
believe there is much more that needs to be done to improve the
profitability of the business."
Investors have until March 26 to submit proxy proposals. Prior
to Tuesday's announcement, Starboard has indicated it would
nominate a slate of new directors. The investor didn't respond to a
request for comment.
At the moment, Yahoo is focusing on trimming costs to make it
more attractive to investors or buyers. Yahoo said that by the end
of 2016, it anticipates having about 9,000 employees and fewer than
1,000 contractors, which represents a workforce that is roughly 42%
smaller than it was in 2012. The company sees the cuts resulting in
savings of $400 million a year.
In a call with analysts on Tuesday, Ms. Mayer said the
restructuring would help Yahoo improve its focus on three key
areas: search, communications and digital content.
"We will simplify the business to improve execution," Ms. Mayer
said on the call. "Yahoo cannot win the hearts and minds of users
and advertisers with a complex portfolio of assets."
Yahoo also said it has begun to explore divesting itself of
nonstrategic assets, such as patents, the sale of real estate, and
other noncore assets. Through the end of the year, the company
estimated that these efforts could generate between $1 billion and
$3 billion in cash.
"The board also believes that exploring additional strategic
alternatives, in parallel to the execution of the management plan,
is in the best interest of our shareholders," Yahoo Chairman
Maynard Webb said in a news release. That represents a broadening
in stance from December, when Mr. Webb said the company wasn't
interested in a sale but would entertain offers as part of the
board's fiduciary duty.
Yahoo also said Tuesday that finance-industry entrepreneur
Charles Schwab is resigning from its board. Mr. Schwab was among
the seasoned executives Ms. Mayer added to the board as she put her
own stamp on its governance.
Mr. Schwab, whose departure will leave the Yahoo board with
seven directors, pointed to his other professional commitments and
demands on his time and said his departure wasn't related to any
disagreement with the company.
Shares of Yahoo, down 35% over the past year, fell 1.8% to
$28.53 in after-hours trading.
Yahoo reiterated Tuesday that it will continue exploring a
separation of its operating business from its stake in Alibaba
Group Holding Ltd. "I do feel comfortable we can do it this year,"
Chief Financial Officer Ken Goldman said on the earnings call.
Write to Douglas MacMillan at douglas.macmillan@wsj.com and Dana
Mattioli at dana.mattioli@wsj.com
(END) Dow Jones Newswires
February 02, 2016 20:11 ET (01:11 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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