Yahoo may announce a new round of layoffs next week, the third since early 2008 and the first staff-trimming under new CEO Carol Bartz, The New York Times and The Wall Street Journal are reporting.
The layoffs could affect several hundred employees and could be announced on Tuesday, when Yahoo is scheduled to report its first-quarter financial results, the newspapers reported, quoting anonymous sources.
Yahoo laid off about 2,600 employees in two rounds of layoffs last year, which it ended with around 13,600 staffers.
If the reports of a new wave of layoffs are accurate, such a move would likely hurt the already battered morale within the company and be yet another reminder that Yahoo’s long-awaited turnaround is still out of reach.
“It would be very unfortunate because there has been an uptick in morale since Bartz’s appointment. The things she has been doing have given people a sense that Yahoo is coming back and regaining momentum. This will make employees feel like the company is stumbling again,” said industry analyst Greg Sterling from Sterling Market Intelligence.
Staffers who avoid the pink slips but lose confidence that things are improving may start looking for other jobs, something Yahoo can ill afford given the considerable talent drain it has experienced in the past nine months or so, Sterling said.
It will be interesting to see where the cuts are made and under what rationale. They could be across the board due to a bad first quarter, or they could be centered on specific product groups that Bartz may have decided to streamline or shut down, Sterling said.
The start of Yahoo’s decline is open to debate, but it probably began in 2001 around the time it had the chance to buy a small startup called Google, which had impressive search engine technology.
Instead, Yahoo misread the opportunity that search advertising represented and let Google get a solid, early lead in the market that has turned into absolute dominance.
Along the way, Yahoo also failed to jump on hot technology trends, like video sharing, blogging and social networking that nimble Web 2.0 startups capitalized on in recent years.
Things took a turn for the worse early last year, when Yahoo, in the midst of a turnaround plan drafted by co-founder and then-recently minted CEO Jerry Yang, received an unsolicited acquisition offer from Microsoft.
Yang and his executive team and the board were roundly criticized for what was perceived as an unwillingness to fairly consider the acquisition offers from Microsoft. Microsoft eventually walked away in May, but has continued trying to strike a more limited search-advertising deal with Yahoo.
Along the way, shareholders revolted and filed lawsuits, Yahoo tried unsuccessfully to partner with seemingly every major Internet player and the company’s financial results continued to generally disappoint.
A defeated Yang announced his intention to step down as CEO in November and Bartz was appointed in January. Bartz has so far earned praise from industry observers for her straight-talking style and for her initial reorganization steps, which are aimed at simplifying Yahoo’s notoriously complex corporate structure, so that decisions can be made more quickly.
In addition, like other Internet companies that depend primarily on online advertising for their revenue, Yahoo faces a weakening market.
Online advertising spending in the U.S. grew considerably less in 2008 than in prior years, reaching $23.4 billion in 2008, a 10.6 percent increase compared with 2007, the Interactive Advertising Bureau and PricewaterhouseCoopers reported recently.
That growth rate pales in comparison to the 26 percent jump in spending recorded in 2007 over 2006. In the fourth quarter of 2008, spending was US$6.1 billion, up 2.6 percent compared with the same quarter in 2007, and 4.5 percent compared with 2008’s third quarter, the smallest quarterly sequential increase since 2001.
Google is poised to fare better than Yahoo and others because search advertising, from which Google generates most of its revenue, broadened its lead as the preferred online ad format, accounting for 46 percent of spending in 2008’s fourth quarter, up from 42 percent in the same period in 2007. For the full year, the search format had a 45 percent share, up from 41 percent in 2007. It has been the most popular ad format since 2004 and is the engine behind Google’s stellar financial performance throughout its history.
Recent media reports claim that Bartz and Microsoft CEO Steve Ballmer have been meeting to try to hammer out a search-advertising partnership.
Yahoo declined to comment about the reports in the Times and the Journal.