Yahoo CEO Scott Thompson says company needs to become more nimble to respond quickly to user and advertiser needs.
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Yahoo said Wednesday that it plans to lay off at least 2,000 employees as part of a broad restructuring through which the company hopes to regain its status as an Internet leader after having been eclipsed by social media sites like Facebook and Twitter.
"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.
"We are intensifying our efforts on our core businesses and redeploying resources to our most urgent priorities. Our goal is to get back to our core purpose--putting our users and advertisers first--and we are moving aggressively to achieve that goal," said Thompson, the former head of Paypal who replaced Yahoo CEO Carol Bartz in January. "Unfortunately, reaching that goal requires the tough decision to eliminate positions."
Thompson did not specify which areas would be cut; the reductions represent about 14% of the company's total workforce. The company said it expects to take a charge against earnings of $125 million to $145 million to cover severance costs, or possibly more if the cuts go deeper. It said it will realize $375 million in annual savings after the layoffs are complete.
Yahoo has seen a steady erosion in its share of Internet search and advertising. The company's total revenue fell 21% last year, to $4.98 billion compared to $6.32 billion in 2010. Net income fell 15% year-over-year, to $1.06 billion. Yahoo's share of the U.S. search market was 13.8% in February, down from 14.1% in January, according to the latest data from market watcher ComScore. Yahoo farmed out Internet search and search advertising to Microsoft's Bing service under a 2009 deal.
Yahoo faces challenges on a number of other fronts, as well. Activist shareholder Third Point is seeking greater representation on the company's board and has launched a website on which it criticizes current and past leadership.
"Yahoo shareholders, employees, and partners have suffered for too long with a revolving door of management teams and directors who have been unable to seize opportunities despite the company's enduring role as the premier online source for news," Third Point said on the site.
Yahoo is also locked in a patent dispute with Facebook. Yahoo sued Facebook in mid-March over 10 patents related to Web display advertising. On Tuesday, Facebook fired back with a lawsuit of its own, accusing Yahoo of violating its patents relating to advertising, photo sharing, and personalization.
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