Skip to main content

Yahoo plans to lay off 15 percent of its workforce, hints it's up for sale

Yahoo plans to lay off 15 percent of its workforce, hints it's up for sale


'We will engage on qualified strategic proposals.'

Share this story

For the last four years, Marissa Mayer has tried her best to right the sinking ship that is Yahoo. She acquired dozens of young startups, refocused engineering efforts on mobile, and tried to boost morale. Unfortunately, Yahoo's revenue keeps shrinking, and top talent is increasingly heading for the exit. At the start of Mayer's tenure, Yahoo's quarterly revenue was around $1.4 billion. Today it reported its results for the fourth quarter of 2015, notching $1.27 billion in revenue and $63 million in profit.

That profit doesn't include a massive write down of Yahoo's "goodwill," the intangible value of its brand. Counting that "goodwill impairment," Yahoo lost $4.53 billion this year. It's a one-time blow, so it makes sense to ignore it when calculating Yahoo's earnings. But it's also an open acknowledgement of how far the company has fallen. Pair that with a quote from Maynard Webb, Yahoo's chairman of the board, and it's clear the company is putting all or at least parts of itself on the auction block.

"The Board also believes that exploring additional strategic alternatives, in parallel to the execution of the management plan, is in the best interest of our shareholders," said Webb in Yahoo's letter to investors. "Separating our Alibaba stake from our operating business continues to be a primary focus, and our most direct path to value maximization. In addition to continuing work on the reverse spin, which we've discussed previously, we will engage on qualified strategic proposals."

Yahoo just lopped $4 billion off the value of its brand

Yahoo is also in the strange position of being valued at less than nothing by investors. That's because its core business is in decline, and its most valuable asset, a massive stake in Alibaba, is in limbo. At the end of last year Yahoo announced a bizarre plan to spin Yahoo off from itself, creating a new company made up of Yahoo's web business, and leaving behind Alibaba. While investors wait to see how that plays out, they are valuing Yahoo at less than the price of the Alibaba stake and the cash Yahoo has in the bank.

Mayer has let go of roughly 32 percent of Yahoo's workforce since she began and today announced that Yahoo will eliminate an additional 15 percent of its employees and close five offices around the globe. It's also killing off two legacy products, Yahoo Games and Smart TV. In November of last year, Mayer reportedly asked her executives to sign a pledge, committing to keep working at Yahoo for another three to five years. That has since morphed into a "invest / maintain / kill" list, an attempt to satisfy anxious investors who want to see cost cutting, while stemming the brain drain that has seen numerous top executives depart by clarifying which units will continue to be supported.

RIP Yahoo chess

There have been some glimmers of hope for Mayer's Yahoo. It struck a deal to to get search results and ads from Google back in October, allowing it to continue monetizing this aging asset while it shifts focus to Project Index, a mobile search engine, and Gemini, product listings ads optimized for mobile search. And some of its refreshed apps, like Yahoo Weather, have stood out from the competition. Yahoo said today that going forward it will focus on three core consumer products — Search, Mail, and Tumblr — and four verticals — News, Sports, Finance, and Lifestyle — while keeping these services targeted at growth markets like the US, Canada, UK, Germany, Hong Kong, and Taiwan.

Additional reporting by Ananya Bhattacharya