Struggling search engine company Yahoo Inc. said it plans to cut about 15% of its workforce as part of a $400 million cost-cutting effort intended to “simplify” the troubled Internet company. Sunnyvale, Calif.-based Yahoo plans to lay off about 1,500 employees and close five offices in Dubai, Mexico City, Buenos Aires, Madrid and Milan — with the bulk of cuts by the end of March, Yahoo said Tuesday.
By the end of 2016, the online and mobile advertising company expects to have about 9,000 employees and fewer than 1,000 contractors, down from closer to 12,000 last year. The cuts were announced as part of Yahoo’s newly announced goal to “simplify the company” amid criticisms that Mayer has failed to grow it through acquisitions and hiring. In addition to staff reductions, Yahoo will thin its online and mobile offerings to support those that generate the most revenue. Also, as the company attempts to separate its Internet advertising and media business from its $25 billion stake in Chinese Internet retailing giant Alibaba, Yahoo’s board will entertain strategic proposals, which could potentially include either a sale of part of the company or a potential merger.
Yahoo (YHOO) shares fell about 2% in after-hours trading to $28.44, however, as shareholders reacted to the new plan and the news that Charles Schwab has stepped down from the board, marking the second director to resign in just two months. Board member Max Levchin departed in December. Mayer’s plan to simplify the business through downsizing is likely aimed at pleasing shareholders who have been calling on her to concede that her turnaround plan has failed and put the core Web businesses up for sale.
But some Yahoo shareholders said they were not impressed by Tuesday’s plan. Yahoo’s simplification strategy “does not fully address the core issues which have destroyed shareholder value — poor capital allocation, bad strategic partnerships, out of control spending and a bloated workforce,” hedge fund firm SpringOwl said in an emailed statement Tuesday. SpringOwl has previously called for Yahoo to radically cut costs and hire a new CEO to carry it out.