Ahead of its Q4 earnings and a bigger restructuring on the cards, Yahoo is downsizing in its regional operations, specifically in Latin America. TechCrunch has learned and confirmed that Yahoo has closed its offices in Mexico City and Buenos Aires, Argentina. It’s not pulling out of Latin America altogether: the company is keeping teams in Sao Paulo, Brazil and Coral Gables, Florida.
“Yahoo is focused on maximizing growth. With that in mind, we communicated to employees in Argentina and Mexico that we will be closing our offices there,” a Yahoo spokesperson said. “Our impacted employees will be treated with respect and fairness through this transition. Latin America is an important region for Yahoo and we will continue to invest in the people and products there. Our teams in Brazil and Coral Gables (Miami) will remain vital to the company. (Attributable to a Yahoo spokesperson)
Yahoo declined to say how many people are being impacted by the closure; a source says it is less than 50 people. The spokesperson said it does not plan to outsource any of its operations to third parties, which is one route that some tech companies have taken to building out and running commercial operations in the region. However, another source tells us that Yahoo is considering doing exactly that.
One source tells us that Mexico was one of Yahoo’s more cost-efficient and profitable operations, if on the small side: the operation only had 10 employees versus 200 in the Brazil office but was putting in one-third the amount of revenue as Brazil, the source says.
(And… Yahoo Mexico is also the subject of a pretty crazy $2.7 billion lawsuit over a yellow pages deal that went bad several years ago. Yahoo lost but eventually reversed the judgement, and another attempt to reinstate the fine also failed in 2015 but it is apparently still being pursued by the plaintiff.)
So why the closure? Yahoo is clearing out smaller (even if profitable) operations to help reinforce the restructuring and cost-cutting points that will be made around earnings next week, the source says, where there may well be more international cuts announced as well. Brazil, being the B of the BRIC group of large and fast-growing developing markets, is seen as having more potential or at least as being the base for the larger region, even if the returns have yet to bear that out.
Under CEO Marissa Mayer, Yahoo has been downsizing operations in international markets for a while now, for example reducing staff or closing offices altogether in India, China, other parts of Asia and Europe and the Middle East.
Much of that was done in the context of a company in the midst of an aggressive bid to rejuvenate itself: Mayer was also leading the charge on dozens of startup acquisitions to boost Yahoo’s platform and talent pool after the once-mighty giant of the Internet toiled under years of stagnation, falling behind the likes of Google in key areas like search and mobile; and the closures in regional operations were about streamlining to focus on Yahoo’s core business.
While some observers may have raised questions about Mayer’s strategy, it was largely supported and also came with the knowledge that Yahoo was sitting on another sweet asset: its holdings in Alibaba, amounting to billions of dollars on the balance sheet.
In that context, this latest downsizing move in LatAm feels like it is coming at a more urgent time. Investors have run out of patience for the turnaround effort; and there are calls for major changes that could include spinning off or selling different parts of the business. Some believe Mayer should leave altogether.
There have been reports that the company is planning to lay off some 10%, or 1,000, employees. We have heard from sources close to the company that the numbers are going to be detailed around the time of Yahoo’s earnings.
However, Yahoo appears to still be weighing up just exactly what it will do longer term. This report in Reuters, for example, claims Yahoo is waiting to see market reaction to its latest earnings — coming out on February 2 — before making a decision. To that end, it seems more than coincidental that there are also stories coming out about how the company is still attracting talent and hiring.
Update: Since this article was published, one source contacted TechCrunch and said that the two operations were actually profitable. A follow up on Twitter also claims the same:
Separately, we’ve heard from sources that the spectre of closure had been hanging over the offices for a while — how could it not, given the bigger issues that Yahoo was going through — although Yahoo continued to reassure staff that it was business as usual. Again, we’ve seen Tweets that also support that claim, too.
Hoping for the best for those affected.