Yahoo said it will cut 15% of its workforce, or about 1,600 jobs, and the Internet company officially put itself on the block by announcing that it is exploring “strategic alternatives.”
The company made the announcements in reporting financial results for the fourth quarter of 2015 that beat analyst projections for top-line revenue. Yahoo posted quarterly revenue of $1.27 billion (versus $1.18 billion in the year-earlier period) and adjusted earnings per share of 13 cents (compared with 30 cents). Wall Street had expected revenue of $1.19 billion and EPS of 13 cents, per Thomson Reuters.
“This is a strong plan calling for bold shifts in products and in resources,” CEO Marissa Mayer
said in a statement. “The plan announced today builds from that achievement and will dramatically brighten our future and improve our competitiveness, and attractiveness to users, advertisers and partners.”
For consumer products, Yahoo will focus on three platforms globally: Search, with an emphasis on mobile search; Mail; and Tumblr. It will pare down to four vertical segments — News, Sports, Finance and Lifestyle — in “growth markets” like the U.S., Canada, the U.K., Germany, Hong Kong and Taiwan.
As part of its cost-cutting measures, Yahoo said it plans to reduce its workforce by roughly 15% and shut down five offices (in Dubai, Mexico City, Buenos Aires, Madrid and Milan). The company said it expects most of the restructuring changes will take place in Q1. By the end of 2016, the company expects to have approximately 9,000 employees and fewer than 1,000 contractors — a workforce that 42% smaller than it was in 2012. The cuts will result in savings in short term operating expense of $400 million annually, according to the company.
“Yahoo does not take this decision lightly and will make every effort to handle the process with thoughtfulness, transparency and compassion,” the company said.
Potential suitors for Yahoo’s Internet businesses include Verizon Communications, which acquired AOL for $4.4 billion last year. Others, including private-equity firm TPG Capital, have expressed an interest in Yahoo’s assets as well, the Wall Street Journal reported.
Yahoo chairman Maynard Webb said that “in addition to continuing work on the reverse spin, which we’ve discussed previously, we will engage on qualified strategic proposals.”
In December, Yahoo abandoned plans to spin off its stake in Chinese e-commerce giant Alibaba Group and announced that it would instead do a reverse spinoff of its other assets, putting those businesses into a separate, publicly traded company.
Mayer has been under mounting pressure from investors, including most notably Starboard Value, to sell or spin off Yahoo’s core businesses. Starboard also has called for the board to install a new management team citing Yahoo’s deteriorating financial performance since Mayer, a former top exec at Google, took the CEO job in 2012.
Yahoo’s steps to streamline operations since then have included shutting down Yahoo Screen, the video service that was the home to licensed programming and originals including the sixth season of “Community” from Sony Pictures Television.
In 2016, Yahoo said on Tuesday, it will consolidate some digital magazines under one of four core vertical segments (news, sports, finance and lifestyle) and will shut others down. The company also will exit its Games and Smart TV businesses, “which have not met growth expectations,” Yahoo said.
In addition, Yahoo is exploring the divestiture of “non-strategic assets” such as non-strategic patents and real estate. Through the end of 2016, the company estimates those efforts could generate between $1 billion and $3 billion in cash.
For Q4 2015, Yahoo took a $4.46 billion “goodwill impairment charge,” saying the company concluded that the carrying value of U.S., Canada, Europe, Latin America and Tumblr reporting units “exceeded their respective estimated fair values.”
Yahoo’s search revenue for Q4 totaled $522 million (up 12% year over year) while it paid $141 million to search partners in the period versus $5 million in Q4 2014. Display advertising revenue was $601 million (up 13%) and Yahoo paid $130 million to display partners, nearly double the year prior.
The company touted growth of its “Mavens” businesses (mobile, video, native and social), which generated $472 million in revenue for the fourth quarter of 2015, a year-over-year increase of 26%. Yahoo projects Mavens growing to $1.8 billion this year, up from $1.66 billion in 2015.
Mayer, on the call with investors, took time to complain about news reports alleging that Yahoo spends lavishly on perks and parties for employees, including the charge that it has paid $450 million on free food over four years. Mayer said those are off by a factor of “more than three.”
For the first quarter of 2016, Yahoo expects revenue to be $1.05 billion to $1.09 billion, with an adjusted operating loss of $30 million to $50 million, CFO Ken Goldman said on the call. The company is forecasting full-year 2016 revenue of $4.4 billion to $4.6 billion (versus $4.97 billion in 2015) and adjusted operating income of $150 million to $250 million.