Reportedly, web pioneer Yahoo Inc. (YHOO) is eliminating about 3% of its global workforce or about 400 jobs in India in order to reduce operational costs. The layoff reflects an attempt to concentrate on growth areas with an optimized cost structure that would in turn improve the company’s competitiveness.
The workforce reduction is being conducted across Yahoo’s Bangalore offices, which focus on technology, operations support and engineering. Jobs are being cut across all divisions but the product team is the hardest hit. A few terminated employees have been offered jobs in the U.S.
This is the largest staff reduction under chief executive officer Marissa Mayer. Management stated that Yahoo is seeking new means for greater efficiency, collaboration and innovation across its business. Yahoo will, however, continue functioning in Bangalore with a consolidated staff in a lesser number of offices.
Mayer, who joined Yahoo in 2012, has been taking initiatives to get this struggling Internet company back on track. Yahoo acquired more than two dozen companies with the same intention. This is deemed as Mayer’s attempt to establish Yahoo as a leading content provider, as its search business continues to dwindle.
Despite all these efforts, Yahoo has failed to impress with its results. The company’s second-quarter earnings, excluding restructuring charges but including SBC and gains from patent sales, came in at 30 cents, which were down both sequentially and year over year. Also, revenues of $1.08 billion were down 4.3% sequentially and 4.5% year over year. The company is struggling with display advertising, a core part of its business. Display revenues were $436 million for the second quarter, down 3.7% sequentially and 6.9% from the comparable quarter of 2013.
Additionally, social networking sites Facebook (FB) and Google Inc. (GOOGL) have been eating away its market share over the years. Lately, Yahoo has also been facing opposition from activist investor Starboard Value. The firm has been compelling Yahoo to end its acquisition efforts and consider an amalgamating with rival AOL Inc. (AOL).
We believe that Yahoo’s restructuring efforts could help Mayer in bringing about a positive change. Also, a leaner cost structure would boost margins and earnings growth in the near future.
Yahoo currently has a Zacks Rank #3 (Hold).
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