Yahoo plans layoff after profit plunges

Several hundred employees will lose jobs in coming weeks as the online pioneer tries to change course.

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Yahoo's revenue is under pressure.
Yahoo's revenue is under pressure. Yahoo

Yahoo, which announced a profit drop of 78 percent for the first quarter of 2009 on Tuesday, said it plans to cut about 5 percent of its employees.

Yahoo's first-quarter net income dropped 78 percent annually to $118 million as the company struggled with the recession's effect on online advertising, but the company's cost controls helped soften the blow--at least for shareholders. Several hundred Yahoo employees will be directly affected in the third major layoff in a just over a year.

"To allow flexibility for accelerated strategic investments and targeted hiring in its core operations, Yahoo expects to reduce its number of current employees worldwide by approximately 5 percent. The majority of impacted employees are expected to be notified within the next two weeks. The company is also continuing to implement non-headcount cost reductions," Yahoo said.

New Chief Executive Carol Bartz said in a statement that the company is positioned well for an economic recovery.

"Yahoo is not immune to the ongoing economic downturn, but careful cost management in the first quarter allowed our operating cash flow to come in near the high end of our outlook range," Bartz said. "While we experienced pressure in both display and search advertising in the first quarter, we believe Yahoo remains one of the most compelling advertising buys on the Internet."

Revenue, excluding commissions paid to partners that carry Yahoo advertisements, declined 14 percent from $1.352 billion to $1.156 billion, well short of the $1.204 expected by analysts.

Update 2:22 p.m. PDT: The Yahoo finished the first quarter of 2009 with 13,500 employees, so a 5 percent cut would affect about 675.

Yahoo cut 1,520 employees last December and about 1,000 in early 2008

But the cuts this time are different, Bartz said in a conference call.

"This is not the kind of across-the-board (cuts) Yahoo undertook in the fourth quarter in response to the macroeconomic environment," Bartz said. Instead, she said, it's part of Yahoo's effort to streamline, trim its product portfolio, eliminate duplicate efforts, and enable hiring in areas where the company wants to invest.

So what are the areas where Yahoo plans to focus its attention? Bartz called out its home page, sports, news, finances, mail, search, mobile, and entertainment.

"We will maniacally focus on our most important products," Bartz said.

Overall, she said, page views worldwide increased 8 percent, she added.

Update 3:15 p.m. PDT: Yahoo announced Jeff Russakow will become senior vice president of customer advocacy, reporting to Bartz, on Friday. Previously he led global enterprise support services, corporate strategy, and other operations at Symantec.

"We need to do a better job of listening to Yahoo!'s users and advertisers and incorporating their feedback into our products and processes," Bartz said in a statement.

The company also is hiring a chief financial officer to replace Blake Jorgensen, who said Tuesday's conference call with financial analysts will likely be his last with Yahoo, and a head of international operations.