What's next for Yahoo after layoffs?

As it rapidly loses ground to Facebook and Google, Yahoo is reportedly taking severe measures to restructure.

By TheWeek.com Mar 7, 2012 11:14AM
Yahoo (YHOO) is preparing to lay off "thousands" from its 14,000-strong workforce, reports Kara Swisher at All Things D. The move is part of a "massive restructuring" being launched by chief executive Scott Thompson, who took the reins in January.

Thompson was brought in to shake things up at the hobbled search giant, which continues to lose ground to Google (GOOG) and Facebook in the battle for online advertising dollars. Yahoo is now the third most popular search engine, behind Google and Bing, and its revenues have declined for three straight years. Yahoo says it has not made any "final decisions" on layoffs, but analysts are already reading the tea leaves.

Here are four predictions of what's on the horizon for Yahoo:

1. No department at Yahoo is safe
One manager tells Swisher that the layoffs are going to be "deep," targeting Yahoo's public relations, marketing, research, and marginal businesses. "Yahoo is no stranger to layoffs," but these cuts appear to be more dramatic, says Chris Nerney at ITWorld. "It sounds like every division and project at Yahoo must make an economic case for its survival."

2. Yahoo will be a leaner company 

The overhaul will bring a "significant paring of [the company's] many businesses," says Swisher, and the result will be a "leaner and meaner Yahoo." An unidentified source says the pruning will open up resources for "better efforts," and facilitate a "true change to get this company back on track."

3. Layoffs are just the first step 

Cutting costs is just one part of the equation, says Larry Dignan at ZDNet. Thompson also has to raise new revenue, but there's a problem: He "hasn't set a plan yet." Once the layoffs are executed, however, Yahoo's "plans for boosting revenue should become clearer," says Cameron Scott at IDG News. Investors can make projections "based on which departments and products are cut and which are left intact."

4. Yahoo's bold moves could hurt the company

The company needs "radical transformation," and in many ways, this is a promising start, Macquarie Capital analyst Ben Schachter tells CNBC. The layoffs will certainly "help with costs," says Nicholas Carson at Business Insider, and "we hope that Yahoo can be done with them in one go." But they are risky, BGC Partners analyst Colin Gillistells the Los Angeles Times. It's hard to "cut your way to revenue growth," and layoffs could demoralize staff and spur talented employees to flee the company.

More from The Week
Mar 7, 2012 2:08PM
That other article said job growth is up and the economy is expanding. I guess somebody should tell Yahoo.
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