Yahoo plans to cut workforce by 10%

News of workforce reduction comes a day after activist investor Starboard Value called for significant changes in a letter to Yahoo board

Yahoo reportedly plans to cut its workforce by at least 10%, starting as early as this month, in its continuing efforts to cut costs.  

The beleaguered internet firm has been in decline since its advertising business was eclipsed by rivals Google and Facebook.

Chief executive Marissa Mayer has come under increasing pressure as her attempts to reverse the company’s fortunes in the past three years have failed to boost revenues.

Despite a string of strategic acquisitions focused on improving the company’s mobile services, Mayer is yet to deliver on her turnaround mission and Yahoo’s revenues have remained flat.

Many of her initiatives, including original video programming, digital magazines and silent video-messaging app Livetext, have had disappointing results.

The planned layoffs, which would result in more than 1,000 staff leaving the company, will affect Yahoo’s media business, European operations and platforms-technology group, reports Business Insider, citing inside sources.

News of the planned job cuts comes just days after activist investor Starboard Value sent a letter to Yahoo’s board that was implicitly critical of Mayer and her leadership team.

“Despite over three years of effort and billions spent on acquisitions, the management team that was hired to turn around the core business has failed to produce acceptable results, in turn causing massive declines in profitability and cash flow,” the letter said.

Starboard Value also threatened to shake up the board if Yahoo’s stock continued to suffer.

Yahoo spokeswoman Rebecca Neufeld said the company will give more details about its turnaround plan before its fourth-quarter earnings call this month.

Starboard Value, which owns about 0.75% of Yahoo, is among the shareholders who have demanded that the company separate its Asian assets, including stakes in Chinese e-commerce company Alibaba Group Holding and Yahoo Japan, and auction off the core business, including search and advertising businesses.

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But Yahoo’s board decided against the spin-off of Alibaba, reportedly because of concerns that it would incur a tax bill of $10bn. The risk of a huge capital gains cost increased after the US revenue service refused to affirm in advance that the spin-off would be tax-free.

Analyts said the decision not to spin off the Alibaba stake was potentially bad news for Mayer, who backed the move as a way to generate a lot of money for Yahoo and its shareholders.

Starboard Value said in its letter to the board that although the failed separation has been frustrating, “we are confident that a separation of these assets can be accomplished through either a sale of the core business or a spin of the core business”.

In December 2015, news that Yahoo had abandoned its plans to spin off its $32bn stake in Alibaba fuelled speculation that it may sell off its internet business.

Starboard Value’s letter concludes by saying that if the board is unwilling to accept the need for “significant change”, then an election contest may be needed so that shareholders can replace a majority of the board with directors who will “represent their best interests and approach the situation with an open mind and a fresh perspective”.

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