Heads Begin to Roll at Yahoo

As a bookend to a tumultuous year, Yahoo has begun handing out pink slips to about 1,500 employees, acting on an earlier announcement that it would cut at least 10 percent of its staff before year's end.

The "at least" part of the announcement had left open the question of how many people would be let go, but Yahoo confirmed Wednesday that it will be a 10 percent reduction of its about 15,000 employees.

"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 US$400 million in costs on an annualized basis. "This is part of an ongoing effort to foster a culture of efficiency and cost discipline," the statement reads.

When it announced the layoffs in October, Yahoo also said that it plans to save money by relocating operations to places where it's cheaper to do business, consolidating its real estate, improving procurement and seeking efficiencies in its technology platform.

The affected employees will be supported with severance packages and other services. This round of layoffs is the second one this year for Yahoo, which 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 of 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 as soon as a replacement is found, although he will remain a board member and reclaim his "Chief Yahoo" title.

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

Yang got loudly criticized by 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.

On Wednesday, large Yahoo shareholder Ivory Investment Management LP 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.

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