“Today’s actions are an important next step toward a bold, new Yahoo! — smaller, nimbler, more profitable and better equipped to innovate as fast as our customers and our industry require,” said Yahoo
CEO Scott Thompson in a statement. “Unfortunately, reaching that goal requires the tough decision to eliminate positions.”
While Yahoo has had periodic layoffs over the years, this one is its most significant in its history, and will also result in another large-scale restructuring of the management organization. More cuts are also likely to follow in the months ahead, due to the reshaping of Yahoo.
The latest employee action is being pushed by Thompson, who joined the Silicon Valley Internet giant in January from eBay’s PayPal unit.
“Change is never easy,” he wrote in an internal email to Yahoo employees (it is below in its entirety), in a well-worn cliché I am dead certain few appreciated hearing today from the top leader.
At an internal meeting with top staff last night, Thompson — who has gotten what seems to be a well-deserved reputation for chewing folks out at Yahoo — was more direct with the execs gathered, berating them extensively for not delivering and getting the company to this sorry point.
Ouch, Scott! It’s Easter, so it might be time for some forgiveness. (And no more ranting about my reporting to those inside Yahoo, since I have been 100 percent accurate so far. FYI, will aim for 110 percent next week!)
Yahoo said it will save about $375 million with the cuts, incurring a $125 to $145 million pretax cash charge for employee severance in its second quarter. Before the cuts, Yahoo had 14,000 staffers and has many thousands more hired as contractors.
The layoffs touch all units of the company, but the hardest hit is the product division, which is headed by Blake Irving, as well as its marketing, research and international units. Yahoo gave no details on the layoffs other than the number.
But the fate of two key parts of the soon-to-be-blown-apart unit — Yahoo’s advertising technology businesses, Right Media and APT, and its search business — is still being contemplated, as I have previously reported. Possible scenarios include a sale or a joint venture transaction for both, which employ thousands of Yahoo staffers.
The layoffs tomorrow are not the end of the road in cutting costs. Along with the likely shedding of its ad tech and search businesses, Yahoo leadership is also looking at future cuts as it evaluates current businesses, which could lop even more employees off its roster.
That said, Yahoo will be doubling down in some older and new arenas, so there would also be simultaneous hiring in the months ahead.
As wrenching as they will be today at Yahoo, the layoffs come as no surprise. Thompson had told employees in memos and also in recent meetings that “real change” was coming to the company.
Along with the trauma of the layoffs, Yahoo is also facing two other tense face-offs externally. In one, activist shareholder Third Point is waging a proxy fight for board seats and stepped up the public pressure this week; and Facebook struck back hard at Yahoo’s patent lawsuit with a counterclaim of its own.
After the layoffs tomorrow, sources say Yahoo will be announcing a new organization by next week. Thompson, along with outside consultants he has hired from the Boston Consulting Group, are making what appear to be profound changes.
Sources said that Yahoo will most likely be comprised of a global media division, one that encompasses
Yahoo’s consumer products businesses and one focused on global and regional sales. There could also be a small organization of about 50 employees aimed at future innovation.
Americas head Ross Levinsohn is pegged to run the media arm, which will also include its leads/commerce businesses, such as autos; Shashi Seth — who now heads search and marketplaces — is likely to run consumer products, which will include Yahoo’s communications and search businesses.
Yahoo has already been conducting a search for a new worldwide sales head, who will also be boss of the U.S., Asia and Europe, Middle East and Africa sales regions. Rich Riley, who was recently running EMEA, is reportedly the pick for U.S. sales; Rose Tsou, who is running Asia, would presumably stay put; Yahoo is looking for an EMEA sales lead.
Some current operational execs — such as service engineering and ops head David Dibble, CFO Tim Morse, and top lawyer Mike Callahan — are likely to continue to operate as before.
One big question mark is how Chief Product Officer Irving fits in the possible new org, in which the new units get control of their product development. Irving has reportedly had several incoming job offers, although it is not clear if he has responded to that interest.
But today, the focus is on the layoffs and letting go all those employees, many of whom have worked at Yahoo for years. Even if it will result in a stronger Yahoo, as Thompson promises, it is still a very sad day in Sunnyvale.
Here is a video on the topic that I did with the WSJ.com “Digits” show today, after the cuts were announced early this morning:
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