Yahoo! to press ahead with plan to cut 1,000 jobs

30 Jan 2008

Internet search and content portal Yahoo! is to press ahead with an aggressive plan to axe 1,000 workers. The company last night reported an 8pc increase in Q4 revenues to US$1.8bn, but net income fell from US$269m last year to US$206m.

Yahoo!, which employs 400 people in Dublin, reported a fourth quarter gross profit of US$1.1bn, up 12pc on the year.

The company said that revenues excluding traffic acquisition costs were US$1.4bn, up 14pc.

“This is a pivotal time for Yahoo!’s business and we have a unique window of opportunity right now to make the necessary game-changing investments that will help us capture a significant piece of the growing ad market and create substantial long-term value for shareholders,” said Yahoo! chief executive, Jerry Yang.

“While we continue to face headwinds this year, we believe that the moves we are making will help us exit 2008 stronger and more competitive and return to higher levels of operating cash-flow growth in 2009.”

In an analyst conference call, the company said it will press ahead with plans to cut 1,000 jobs from its workforce.

Yahoo!’s chief financial officer, Blake Jorgensen, explained: “Our outlook contemplates a workforce realignment of approximately 1,000 people that we will be implementing in mid-February.

“We expect to record a cash charge of approximately $20m to $25m during Q1,” Jorgensen said.

Responding to an analyst’s observation that Yahoo!’s revenue per headcount – after the job cuts – will be lower than that of competitors like Google, Yahoo! President, Susan Decker, said it is in keeping with a monetisation model that the company believes will help it return to double-digit cash flow by 2009.

“When we look at the overall cost structure, we compare it to the competitors that we think have the most similar strategies and businesses in terms of the areas in which they would choose to be principals. We actually think our overall cost structure is lower than our two major competitors if you look at the cash costs, ex-TAC.

Decker went on: “In terms of what the overall revenue is, it is affected by the monetisation rates that we can achieve, given a cost structure. The strategy that we’ve outlined is ultimately around building a broad-based, integrated display and search network in which we think we will be able to achieve very significant monetisation advantages over time.

“So we’re very focused on allocating resources in the most effective way to achieve that kind of economic model in future years. That’s why I think Jerry [Yang] indicated he thought we could return to double-digit cash-flow growth as we get towards 2009 and get some of these legacy deals behind us,” Decker said.

In accounts filed before Christmas by its Irish subsidiary, Overture Search Services, Yahoo! declared annual royalty income of more than €100m and pre-tax profits of €4.2m.

By John Kennedy