Yahoo confirmed plans today to lay off approximately 15 percent of its workforce. The company made the announcement in conjunction with its its fourth quarter earnings, where it reported revenue of $1.27 billion and earnings per share of 13 cents.
That’s ahead of revenue estimates — had analysts had predicted revenue of $1.19 billion and EPS of 13 cents.
The Wall Street Journal previously reported that a cost-cutting plan was in the works, and earlier this afternoon, it also said that Yahoo would announce that it’s exploring “strategic alternatives” as part of its fourth quarter earnings report. (Activist investor Starboard Value has been calling for changes at Yahoo, including the sale of its core business.) Right on both counts — Yahoo says it will continue to pursue a “reverse spin”, with Yahoo’s non-Alibaba assets transferred to a new company. However, it said the board is also exploring those aforementioned strategic alternatives.
The company also says it’s going to be “sharpening focus,” which it lays out in four broad categories:
- Play to Strengths to Grow User Engagement
- Drive Mavens Revenue Growth (that’s mobile, video, native and social)
- Simplify the Business to Improve Execution
- Efficiently Align Resources
The cuts fall into that final category, with the majority of them expected to happen in the first quarter of this year. By the end of this year, Yahoo projects that it will have around 9,000 employees and less than 1,000 contractors. It also says it will be closing offices in Dubai, Mexico City, Buenos Aires, Madrid, and Milan. (We’d already heard that yahoo was scaling back operations in Latin America.)
In the press release, CEO Marissa Mayer said:
Today, we’re announcing a strategic plan that we strongly believe will enable us to accelerate Yahoo’s transformation. 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.
The big cost for Yahoo this quarter is the company’s massive writedown of nearly $4.5 billion. The crux is that it’s finally coming to terms with what it considers the actual value of its biggest assets, which include Tumblr, and its business in the Americas and Europe.
“We recorded a $4,461 million non-cash goodwill impairment charge as a result of our annual goodwill impairment test conducted in the fourth quarter of 2015,” it noted in its earnings release. “We concluded that the carrying value of our U.S. & Canada, Europe, Latin America and Tumblr reporting units exceeded their respective estimated fair values. The goodwill impairment resulted from a combination of factors, including decreases in our market capitalization, projected operating results and estimated future cash flows.”
As of 5:17pm Eastern, Yahoo’s stock is down 1.4 percent in after-hours trading.