February 4, 2016   World, Technology, Commerce, Americas

Yahoo to narrow focus and cut 15 percent of jobs

The announcement is the strongest sign yet that the board may be willing to sell the struggling Internet business.

The announcement is the strongest sign yet that the board may be willing to sell the struggling Internet business.

Yahoo Inc said on Tuesday it would consider “strategic alternatives” for its core Internet business and cut about 15 percent of its workforce, even as it continues with its plan to revamp the business and spin it off.

The announcement is the strongest sign yet that the board and Chief Executive Marissa Mayer may be willing to sell the struggling Internet business – essentially websites, email and online search – under growing pressure from impatient shareholders.

In an interview with Reuters, Mayer said the company will entertain offers as they come but its first priority is the turnaround plan.

If it receives an offer this year, it was unlikely that the transaction would be completed before the 9 to 12-month timeline projected for the spin-off, she said.

“We would obviously engage but I think the one thing we’re trying to do is set our shareholders’ expectations in terms of complexity,” Mayer said.

The planned restructuring announced on Tuesday includes the closure of offices in five locations, a paring down of its products, shifting more resources to mobile search, and the sale of some non-strategic assets such as real estate and patents.

Investors were not immediately impressed, sending Yahoo shares down 1.2 percent after hours. They have now fallen 36 percent over the past 12 months.

“We believe the strategic plan does not fully address the core issues which have destroyed shareholder value – poor capital allocation, bad strategic partnerships, out of control spending and a bloated workforce,” said New York-based SpringOwl Asset Management, a shareholder which has called for changes at the company.

The web pioneer’s revenue peaked in 2008 and while it still runs some of the world’s most-read websites, it has been unable to keep up with Alphabet Inc’s Google and Facebook Inc in the battle for online advertisers.

In the rejig of its business, it will focus on three main consumer platforms, Search, Mail and Tumblr, and four “digital content strongholds” in the form of News, Sports, Finance and Lifestyle.

The changes are designed to increase mobile, video, native and social advertising revenue 8 percent to $1.8 billion and cut operating costs by $400 million this year. It is also aiming to generate $1 billion to $3 billion in asset sales.

Mayer dismissed accusations of excessive spending, saying a report of a $7 million bill for Yahoo’s holiday party was exaggerated by a factor of three.

Yahoo’s adjusted quarterly revenue tumbled 15 percent to $1 billion after deducting fees paid to partner websites, as it struggles to keep its share of online search and display advertising.

Mayer proposed in December that Yahoo spin off its main business after it abandoned efforts to sell its Alibaba stake.

In the interview on Tuesday, Mayer said the company intends to group its stake in Yahoo Japan with the main business, but would be open to splitting it off depending on market feedback.

The company reported a loss of $4.43 billion, or $4.70 per share, in the quarter, due to a large write-down to account for the lower value of some units. That compared with net income of $166.3 million, or 17 cents per share, a year earlier.

Among the write-downs, the company took an impairment charge of $230 million for Tumblr, the social blogging site for which it paid $1.1 billion in 2013.

Excluding items, Yahoo earned 13 cents per share in line with expectations.

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