A Yahoo worker waves to another worker outside of Yahoo offices in Santa Clara, Calif., Tuesday, Oct. 21, 2008. Mired in a deep slump, Yahoo will fire at least 1,500 workers to cope with a crumbling economy that dented its third-quarter profit and turned up the heat on the Internet company’s management as investors stew over a missed opportunity to sell to Microsoft Corp. for $47.5 billion. (AP Photo/Paul Sakuma) (Paul Sakuma – AP)
SAN FRANCISCO — Yahoo Inc.’s leaders still have jobs despite investor misgivings about their decision making, but at least 1,500 workers will be shown the door after the slumping Internet company’s profits tumbled yet again in the third quarter.
The 10 percent reduction in Yahoo’s payroll of 15,000 employees served as another stark reminder of the challenges facing a management team led by Jerry Yang as the deteriorating economy casts even more doubts about the Sunnyvale-based company’s turnaround plans.
Although Yahoo’s third-quarter profit plunged 64 percent, the cutbacks announced Tuesday are a small step in the right direction, said Cantor Fitzgerald analyst Derek Brown.
“But it seems like there is still a lot more work that needs to be done,” he said.
Yahoo is bracing for a deep downturn likely to extend well into 2009 by trimming $400 million from its annual expenses of $3.9 billion. Besides shedding 1,500 workers during the next two months, Yahoo may close some of its U.S. offices and assign more jobs to lower-paid contractors in other countries.
“We are going into what is very clearly a recession mode,” Blake Jorgensen, Yahoo’s chief financial officer, said in a Tuesday interview.
Yahoo’s determination to rein in its expenses seemed to please investors, who have been disillusioned with the company’s direction for years.
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Yahoo shares gained nearly 7 percent in extended trading after ending the regular session at $12.07, down 79 cents.
But Yang and his lieutenants have a long way to go to justify Yahoo’s decision to spurn Microsoft’s takeover bid of $33 per share last May. Microsoft withdrew the offer after Yang balked at the price, asserting his management team was pursuing a strategy that would prove the company was worth than the software maker’s $47.5 billion bid.
“The heat is definitely still on Yang,” said Canaccord Adams analyst Colin Gillis.
The purge outlined Tuesday marks the second time in nine months that Yahoo has resorted to mass layoffs in what so far has been an ineffectual effort to rebound from a financial funk that has left its stock price near a 5 1/2-year low.
Yahoo is approaching these cutbacks much more aggressively than its last round of layoffs in February, when about 1,000 workers were cut loose. Within a few months, Yahoo’s payroll had expanded back to where it was before the streamlining
