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Yahoo's CEO considering major restructuring, thousands of layoffs

March 05, 2012|By Jessica Guynn
  • Scott Thompson, Yahoo's new chief executive, is said to be considering a major restructuring of the Internet company that may include thousands of layoffs.
Scott Thompson, Yahoo's new chief executive, is said to be considering… (Paul Sakuma / Associated…)

He has only been on the job for two months, but Yahoo’s new chief executive, Scott Thompson, is already preparing a bold attempt to turn around the struggling Internet company.

Thompson is weighing a significant restructuring of Yahoo that could include thousands of layoffs, according to technology blog All Things D.

The moves, the first major ones from the former PayPal president, could be announced as early as this month, Kara Swisher reported, citing anonymous sources.

Yahoo recently hired the Boston Consulting Group to focus on the cuts to its products group. Cuts may also target research, marketing and public relations and other areas that Thompson does not consider central to Yahoo.

Yahoo had 14,100 employees at the end of 2011.

"As we have indicated, our leadership is engaged in a process that will generate significant strategic change at Yahoo, but final decisions have not yet been made at this point. Beyond that, we will not comment," Yahoo said in an emailed statement.

Is this the kind of talk that Wall Street wanted to hear? BGC Partners analyst Colin Gillis says no.

The drumbeat of layoffs at Yahoo, which has been attempting a turnaround for years, has demoralized staff and led to an exodus of key talent, he said.

“You can’t cut your way to revenue growth,” Gillis said.

Thompson signaled his intentions during his first quarterly earnings call with analysts. He said he would focus on striking the right balance between the needs of users and advertisers, media and technology, thoughtfulness and speed, investment in products that generate revenue for Yahoo today and the ones it's banking will generate revenue tomorrow.

“Now we could put everything we have into the core business, focus solely on maximizing today’s profits, and invest nothing in the future. I won’t spend any time on that approach because that’s just not the way to build a business for the long term,” Thompson said. “But I really need to be clear when I talk about investing. This isn’t about starting from scratch on a new investment cycle. We will concentrate on our strengths by repurposing existing investment dollars. As a result, there will be some things that we stop doing.”

Yahoo fired its last CEO, Carol Bartz, in September. It has been undergoing a strategic review that could include an investment from private entities or spinning off some of its Asian assets.

Activist hedge fund ThirdPoint has threatened to install its own slate of directors on Yahoo’s board. In February, Yahoo announced that its chairman Roy Bostock and three other directors would not stand for reelection. Yahoo founder Jerry Yang also left the board. Rovi’s Alfred Amoroso and LiveOps' Maynard Webb have been tapped to join the board, and Yahoo is looking for additional directors.

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-- Jessica Guynn

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