Yahoo to Cut 1,000 Jobs, and Warns on Growth
SAN FRANCISCO — After announcing a sharp drop in fourth-quarter profits Tuesday, Yahoo issued a disappointing outlook for this year, suggesting that investors would have to wait until 2009 for a turnaround.
Yahoo also said that as part of its plan to revive its fortunes, it would cut 1,000 jobs by mid-February to reduce costs and narrow its focus to its most important businesses.
The company, however, said it planned to invest aggressively in some areas, like advertising technology and selected portions of its Internet portal, as it tries to capture a larger share of online ad dollars. Since some laid-off employees could apply for new jobs at Yahoo, the net effect on the work force, which recently grew to 14,300, was not clear.
Jerry Yang, the chief executive, warned investors of “head winds” this year. Yahoo’s projections for revenue growth and profitability in 2008 were either at the low end of analysts’ expectations or below them.
Yahoo executives said those projections were largely independent of the slowdown in the United States economy, noting that it was too early to predict whether weakness in the financial, travel and housing sectors would hurt online advertising.
“There is not a lot of positive about the outlook,” said John Aiken, an analyst with Majestic Research, an investment analysis firm in New York.
In a sign of growing impatience, investors reacted negatively to the announcements, which were made in a conference call after the markets closed. In after-hours trading, Yahoo shares fell more than 10 percent, to levels of more than three years ago.
Yahoo said that its fourth-quarter net income fell to $206 million, or 15 cents a share, down 23 percent from $269 million, or 19 cents a share, in the same quarter a year ago. Revenue grew 8 percent to $1.8 billion. Excluding commissions paid to certain advertising partners, revenue was $1.4 billion, in line with analysts’ expectations.
Mr. Yang, the Yahoo co-founder who was named chief executive last summer amid growing shareholder discontent, has promised to focus on three objectives: becoming a starting point for consumers on the Web; making the company a top choice for marketers seeking to place ads on sites across the Web; and opening Yahoo’s technology infrastructure to third-party programmers and publishers.
It is a strategy that will require time and investments. Yet Mr. Yang said he was upbeat. “We are seeing early signs of success as a result of this clear new focus,” he said.
Yahoo has begun narrowing the focus of its portal on a few key areas, including its front page, the personalized home page service MyYahoo, search, mail, and properties like news, finance and sports.
Improvements to those services has led to double-digit increases in visits to Yahoo, said Susan Decker, Yahoo’s president. Meanwhile, the company has said it would de-emphasize or shut down a number of other services, including photos, podcasts and a largely unsuccessful social network.
Ms. Decker also said that Yahoo had begun to make investments to revamp its advertising and search technology infrastructure, which would allow the company to be more efficient.
Yahoo needs to make some of those investments as it tries to become the seller of ads on a network of Web publishers, which for now includes eBay, Comcast, hundreds of newspapers and others. Some analysts said the plans made sense, but questioned whether the changes could translate into financial gains quickly enough.
“How long does all of this take?” asked Christa Quarles, an analyst with Thomas Weisel Partners. “How long does the board stay satisfied? How long does it take to grow the publisher network? Yahoo’s problems didn’t start in 2007; they started in 2003.”
Yahoo also said that it renegotiated and expanded a lucrative partnership with AT&T. Instead of receiving fees for each broadband customer AT&T signs up, Yahoo will share search and display advertising revenue with AT&T. Under the four-year deal, Yahoo’s search technology will also be available to AT&T’s cellphone customers.
The deal will result in upfront payments from AT&T to Yahoo for $300 million to $400 million, which will be recognized over the length of the agreement. Yahoo executives said that the deal would result in a net revenue loss this year, but that it stood to make more money over the life of the agreement.
Yahoo also said Tuesday that it had appointed Aristotle Balogh, 43, known as Ari, as chief technology officer, a crucial post vacant since Farzad Nazem left months ago. Mr. Balogh had been chief technology officer at the online security firm VeriSign.
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