Yahoo's Latest Layoffs
George is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Yahoo (NASDAQ: YHOO) has walked up to the lip of a very live volcano and is preparing to sacrifice some 2,000 individuals, or 14% of their workforce. So what's wrong with a little cost cutting?
As part of its efforts to become more relevant and find new revenue streams, it's tried restructuring before, and it hasn't exactly worked. The three crowns of internet advertising are financial services, travel and automotive. Yahoo Finance is undisputedly one of the largest and most used financial web sites. What about Yahoo Travel and Yahoo Automotive? Well, no dominance there. China and Japan have taken up so much executive head space that the basic nuts and bolts have not been paid attention to.
Also, when considering shrinking Yahoo, just think of how many people have left voluntarily. Now employees who were thinking of leaving are hoping to snag lucrative exit packages. Throwing employees into the volcano is very tricky.
The statement leaves out what areas are particularly targeted. Of course they will claim to make broad cuts and the market may look at management and ask why they waited so long. The key will be in the mix. As the termination notices travel around the corridor, we'll find out anecdotally. Hopefully on the upcoming conference call on April 17, 2012 17:00 ET, the sell-side analysts will be able to guess at how the ax was swung.
The cutbacks officially are to cut costs and goose the bottom line. The hidden agenda will be to create a better fit with the potential merger or acquisition partners, eliminate potential overlapping areas, and perhaps keep a few stars that may add some sparkle and luster.
So Google (NASDAQ: GOOG) or maybe Alibaba, check the fit again. You know you need to go to the tailors a few times to ensure the cut and stitch work out. But here is the very big rub. When can the takeover offers start? Will the predators pony up now that the overheads are coming down? Or will they wait until the cuts have a chance to heal some and assess from there? I'm thinking the latter so be careful before you load up on this news.
George Gutowski writes from a caveat emptor perspective.
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