Yahoo CEO needs to outline his vision after layoffs

Employees, industry watchers left to guess what comes next, analysts say

As Yahoo announced layoffs of about 2,000 employees Wednesday, industry watchers were asking when its CEO will lay out his vision for the struggling company's future.

Yahoo began informing employees of the layoffs Wednesday, according to a statement. The company, which is cutting 14% of its workforce, expects to save $375 million with this move.

In its statement, the company said: "Through its restructuring efforts, Yahoo intends to grow by responding more quickly to customer needs and competing more effectively in areas where it can win. Yahoo has identified key parts of the business -- a select group of core businesses, the platforms that support those core businesses, and the data that drives deep personalization for users and ROI for advertisers -- where the company will intensify efforts and redeploy resources globally, all focused on increasing shareholder value."

Scott Thompson, Yahoo's new CEO, announced the cuts Wednesday morning. What he didn't say, however, was whether this was the first in a series of cuts, what departments would be hardest hit and if he's working to rebuild the company or preparing it to be sold.

"You need to be clear so you can get the people behind you. It's just showing inexperience," said Rob Enderle, an analyst with the Enderle Group. "At the very least, he needs to articulate a strategy. He needs to lay out a plan, if only to get the employees on board with wherever he's going. He needs to give people some clarity of his vision. He says he's rebuilding something, so he needs to tell people what he's creating."

Enderle added, "You only get away with reshuffling chairs on the Titanic so long. Before too long, you have to right the ship."

For weeks, there have been reports that not only layoffs, but a corporate reorganization, were coming for Yahoo, which has fallen out of the top rungs of Internet companies. Last September, former CEO Carol Bartz was ousted from the company. Since then, co-founder Jerry Yang and several board members have left as well.

Both Enderle and Patrick Moorhead, an analyst with Moor Insights & Strategy, said Wednesday's layoff announcement is just the beginning of another round of sweeping changes at Yahoo.

"Companies in crisis like Yahoo are never finished until they start coming out of the woods. These are like earthquakes, with many aftershocks," Moorhead said. "In general, layoffs combined with an inspiring vision and mission would be positive, but I don't see the vision. Layoffs never are a substitute for a strategy, and many times layoffs are a token to Wall Street."

With little more coming from Thompson about his plans, Moorhead said he is inclined to believe that Yahoo is being prepared for sale. "If you don't hear some large ideas with some execution confidence, I would believe they are getting ready for a sale," he said.

Regardless of whether Yahoo is put up for sale or about to be reorganized, the company needs a clear plan and its executives need to explain it, the analysts said. A taste of this could come April 17 when Yahoo announces its first-quarter financial results.

"I think that Yahoo is going to have to put forward a credible plan to make the company a player again," said Dan Olds, an analyst with The Gabriel Consulting Group. "There isn't anyone out there who will want to buy the company as it currently sits -- at least not at anywhere near a price that will make Yahoo investors happy to sell. Plus, if they come up with a solid plan that works, the value of the company will rise on its own."

Enderle is divided on whether Yahoo will be sold or rebuilt, and said it's not good for the industry, nor for Yahoo employees, to be left wondering.

"I think this is all an indicator that this isn't over," Enderle said. "I think the cuts need to be a lot deeper than they are. You want to make sure this is the first and last layoff you have to do. You don't want to have to keep cutting and cutting."

Sharon Gaudin covers the Internet and Web 2.0, emerging technologies, and desktop and laptop chips for Computerworld. Follow Sharon on Twitter at @sgaudin, on Google+ or subscribe to Sharon's RSS feed . Her email address is sgaudin@computerworld.com.

See more by Sharon Gaudin on Computerworld.com.

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