Heads begin to roll at Yahoo

IDG News Service - Yahoo Inc. has started handing out pink slips to 1,500 workers after confirming today that it is laying off 10% of its workforce of 15,000. Yahoo announced in October, after reporting disappointing third-quarter results, that it planned to reduce its workforce by at least 10%.

"Better aligning costs with revenues now and in the future is an essential part of Yahoo's strategy to perform competitively given the current economic downturn and to position us for growth when the economy strengthens," Yahoo said in a statement.

The staff reduction is part of a plan intended to cut more than $400 million in annual costs. "This is part of an ongoing effort to foster a culture of efficiency and cost discipline," the statement reads.

When it announced the layoff plans in October, Yahoo also said that it plans to relocate operations to places where it's cheaper to do business, consolidate its real estate, improve procurement operations and seek efficiencies in its technology platform.

The affected employees will be supported with severance packages and other services. This round of layoffs is the second this year. Yahoo had cut 1,000 jobs in February.

Yahoo began 2008 with high hopes for a turnaround, after co-founder Jerry Yang took over as CEO from Terry Semel in June 2007.

Yang vowed to restore Yahoo's innovation edge and to boost its finances, but despite setting in motion a number of ambitious business and technology initiatives, he failed to deliver the expected results.

Last month, Yang announced his intention to give up the CEO post once a replacement is found. He will remain a board member and reclaim his "Chief Yahoo" title.

The year was marked by Microsoft Corp.'s attempt to acquire Yahoo, a corporate soap opera whose last chapter has yet to be written.

Yang was loudly criticized by some large Yahoo shareholders and influential financial analysts for, in their opinion, his unwillingness to give fair consideration to Microsoft's offers.

Now, Yahoo's stock is in much worse shape than at the beginning of the year, and its financial performance has been disappointing.

Large Yahoo shareholder Ivory Investment Management LP today urged Yahoo's board to sell the company's search engine ad business to Microsoft, The Wall Street Journal reported. Last week, Microsoft CEO Steve Ballmer said that crafting a search ad deal with Yahoo should be done sooner rather than later.

After Microsoft gave up on its bid to acquire all of Yahoo in May, it came back with an offer to buy the Yahoo search business, but Yahoo also rejected it. Instead, Yahoo cut a search ad deal with Google that was smaller in scope. That deal collapsed after it became clear that the U.S. government would challenge it on antitrust grounds.

On the technology front, Yahoo has embarked on long-range, complicated social computing projects to catch up to nimbler rivals like Facebook, MySpace and Google.

However, Yahoo's grand vision of being the clear top choice for Web developers and for Internet users, as outlined in its Yahoo Open Strategy project, is far from realized.

Having seen a steady stream of high-ranking officials depart voluntarily for greener pastures this year, there are questions of whether Yahoo has a deep enough talent bench to complete these projects on a timely fashion.

Certainly, layoff rounds as significant as the one being carried out right now don't help observers feel more confident.