UPDATE with details from earnings call: Yahoo reported fourth-quarter and full-year earnings today and confirmed widespread media reports that it was cutting 15% of its workforce, or about 1600 jobs, as well as exploring “strategic alternatives” will mean sales of non-strategic assets that it estimates will generate more than $1 billion. CEO Marissa Mayer said during the post-earnings analyst call that it will also eliminate or consolidate some legacy products and look at sales of some of its real estate and patents.
The moves are part of an “aggressive strategic plan to simplify the company, narrowing its focus on areas of strength to better fuel growth, drive revenue and increase efficiency in 2016 and beyond,” the Internet giant said today in a letter outlining the new plan. It says it expects the initiatives will result in short-term operating expense savings of $400 million each year.
The cost-cutting plan includes shuttering five offices in Dubai, Mexico City, Buenos Aires, Madrid, and Milan. With the layoffs, Yahoo anticipates having about 9,000 employees and fewer than 1,000 contractors by year’s end — a workforce about 42% smaller than in 2012.
Yahoo stock is down half a point in after-hours trading after the report. News of the plan had been trickling out ahead of today’s earnings.
The announcement comes as Yahoo posted results for its fourth quarter that were in line with analysts’ expectations. Yahoo reported Q4 revenue of $1.27 billion, or 13 cents a share. Estimates had it at $1.19B.
Mayer said during the call she was “more confident than ever” about Yahoo’s direction with the plan. She highlighted the growth in the Mavens business — Mobile, Video, Native ads and Social — which surpassed $1B in revenue in 2015. Shuttering some units will help Yahoo focus on those growth products — Mayer said Mobile is the largest contributor, adding over $1B, “or nearly a quarter of our traffic-driven revenue.”
Still, Mayer said 2016 will be a transitional one, with revenue and earnings declining.
“Today, we’re announcing a strategic plan that we strongly believe will enable us to accelerate Yahoo’s transformation,” said Mayer said ahead of the earnings call. “This is a strong plan calling for bold shifts in products and in resources. We are extremely proud of the billion dollar plus business we have built in mobile, video, native, and social. Our strategic bets in Mavens have enabled us build an entirely new, forward-leaning business of tremendous scale and growth in just three years. 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.”
In December, Yahoo announced it was planning a spinoff of its core business, not its holdings in Chinese e-retailer Alibaba as it had planned. The strategy, known as a reverse spin, would see assets and liabilities, not including its 15% stake in Alibaba, go into a new company. The plan appeared mostly designed to let Yahoo shareholders take advantage of its $32 billion Alibaba investment without paying taxes on the capital gains.