Actionable news
All posts from Actionable news
Actionable news in YHOO: Yahoo! Inc.,

Bloated Yahoo May Face Job Cuts After Sale of Internet Assets

  • Second-quarter results forecast to show big decline in sales
  • CEO pledge to reduce headcount by 15% this year isn’t enough

Yahoo! Inc. may have a new owner before long. Whoever emerges victorious from the months-long bidding battle will face the difficult task of whittling down a company burdened by one of the the highest cost structures in its corner of the technology sector.

Once the go-to gateway to the internet, Yahoo got fat over the years as it navigated the rapidly changing industry in a sprawling effort to be all things to all people -- from search to shopping to news outlet to blogging hub. Spending ballooned on acquisitions and recruiting in an effort to offset declining sales as ad revenue was siphoned off by competitors. Now Yahoo squeezes far fewer sales from each employee than its peers and its core services are on the auction block.

Alphabet Inc., Google’s parent, had $315,948 in sales per worker in the first quarter while Facebook Inc. garnered almost $400,000. For Yahoo, that figure was less than $116,000. Even the traditionally beefier telecom companies are lean compared with Yahoo. Verizon Communications Inc. counts $185,637 in sales per employee and AT&T Inc. reaps $144,319. Yahoo’s numbers look even worse when subtracting traffic acquisition costs -- the revenue passed onto partners.

Cutting jobs is the most obvious way to come to terms with the excess. While Chief Executive Officer Marissa Mayer has already pared the company back by a third over the course of her four-year tenure, Yahoo’s new overlords will likely slash at least another 3,000 positions, according to analysts, depending on which buyer the company might attract.

“We still think it has some bloated costs that could be taken out,” said Robert Peck, an analyst with Suntrust Robinson Humphrey Inc., who rates the stock a hold.

Cutting 1,000 more jobs would bring the revenue-per-employee number in line with Verizon’s AOL, according to a note Peck wrote earlier this year. A strategic buyer such as Verizon or AT&T could reduce headcount by an additional 3,000, Peck said, due to...