Yahoo Inc will lay off 2,000 people, or 14% of its workforce, in its deepest round of job cuts in years as new Chief Executive Scott Thompson tries to jumpstart growth with a leaner, more agile company while saving hundreds of millions of dollars.
Wall Street's reaction was lukewarm, after two previous Yahoo CEOs failed to find an answer to rivals like Web-search leader Google and the Facebook social-networking site.
Sunnyvale, California-based Yahoo, which ended 2011 with some 14,000 employees, said it would save $375 million annually from the cuts and incur a pre-tax cash charge in the second quarter of $125 million to $145 million.
Some analysts were skeptical about the widely expected layoffs, which weren't accompanied by details of Yahoo's broader plan to revamp its business.
"You can't cut your way to revenue growth," said Colin Gillis of BGC Partners. "What people want to see out of Yahoo is … a plan and provision for revenue growth."
Third Point, an activist hedge fund that is waging a proxy fight to install a slate of handpicked directors on Yahoo's board, described the layoffs as "necessary."
But the hedge fund, Yahoo's largest shareholder with a 5.8% stake, said in a statement that it was "disappointed that this round of cuts occurred before CEO Scott Thompson has articulated his strategic plan for the company."
Thompson, in all-staff memo obtained by Reuters, said the changes would transform Yahoo into a leaner outfit that focuses on its main businesses, which he identified as "core media and communications," "platforms" and "data."
"The changes we're announcing today will put our customers first, allow us to move fast, and to get stuff done," Thompson said in the memo, adding that the changes would result in a "smaller, nimbler, more profitable" company.
"We are intensifying our efforts on our core businesses and redeploying resources to our most urgent priorities," Thompson wrote in the memo.
Macquarie Research's Ben Schachter saw the layoffs as a start in determining the new direction of the company.
"Scott Thompson is not there to tweak the business," Schachter said. "He saw something in the assets to make him think there was potential."
The layoffs come as Yahoo's revenue declines due to competition from Google and Facebook. Last year, Yahoo's revenue totaled $4.98 billion, compared with Facebook's $3.71 billion, accomplished with just 3,200 employees.
Yahoo is also fighting a battle with hedge fund manager Daniel Loeb.
Loeb, who runs Third Point, is seeking to appoint four new directors to Yahoo's board. Third Point, with a 5.8% stake in Yahoo, is the company's largest shareholder.
Yahoo's shares ended up down 0.6% $15.27 on the Nasdaq. The Nasdaq market dropped nearly 1.5%.
