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Marissa Mayer is cleaning house. The question is whether the makeover is to keep Yahoo going for the long term or to sweep out the clutter and attract potential buyers.
To turn Yahoo around, the CEO said Tuesday that she’s cutting about 1,700 jobs, shutting down services like Games, and selling off patents and real estate in the hopes of adding $1 billion to $3 billion to the company’s coffers this year. She’s also put out a call to would-be buyers, saying she and Yahoo’s board are ready to “engage on qualified strategic proposals.”
“Yahoo cannot win the hearts and minds of users with a complex portfolio,” Mayer said on a conference call. “To be clear,
this is a strong plan and a bold plan.”
Her bold plan got a big yawn from investors, with Yahoo’s shares dipping slightly in late trading.
The Internet portal has limped along while users, investors and even employees ask serious questions about its future: Should Mayer keep running Yahoo? Should the 20-year-old company, which helped lead the dot-com boom, remain an independent company? Should Mayer and the board just sell off the whole Internet business?
Yahoo has been mum about its plans until today when Mayer, the company’s sixth CEO in seven years, finally revealed what she intends to do.
By the end of 2016, Yahoo anticipates having about 9,000 employees and fewer than 1,000 contractors. That will make the company roughly 42 percent smaller than it was in 2012. It will also shut down its overseas offices in Dubai, Mexico City, Buenos Aires, Madrid and Milan, and exit businesses like Games and Smart TV to get to a “smaller product portfolio.”
Yahoo’s meh earnings for the fourth quarter only reinforced the need for change. Sales rose to $1.27 billion from $1.25 billion a year ago. Analysts were hoping for $1.19 billion, and the company matched profit estimates. Profit, minus some costs, was 13 cents a share.
Sales for all of 2015 were just shy of $5 billion, up from $4.6 billion in 2014.
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A ‘simplified’ Yahoo
Mayer said the pillars of Yahoo (she actually described it as a three-legged chair) are search, mail and Tumblr, the blogging platform she bought for $1 billion in 2013. As for what else consumers can expect, the portfolio will be “simplified” to four areas: news, sports, finance and lifestyle.
Tuesday’s moves are a reversal for Mayer, a former Google executive who began expanding and investing in new products and services after taking over the Sunnyvale, California, company in July 2012. Yahoo revamped all its mobile apps and services, from Sports to Weather. She also spent over $2 billion on more than 50 acquisitions to bring in new talent and tech. Mayer also made big bets in media, including inking a deal to live-stream an NFL game for the first time in her bid to make Yahoo a relevant online destination and woo people away from rivals like Google, Facebook and Twitter.
But many of those efforts have failed. Mayer also admitted splashy moves like the decision to save the cult sitcom “Community” from cancellation didn’t work out. Last month, Yahoo said it was shutting down Screen, Yahoo’s service for premium video content.
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Now Yahoo, and Mayer, are feeling the pain of those misses. In November, eight of the top 10 smartphone apps in the US were made by Google or Facebook, according to market tracker ComScore. Yahoo’s only spot in the top 15 comes through a partnership with Apple: The Yahoo-powered stocks app that’s automatically loaded on iPhones is No. 12 on the chart.
The status of Yahoo’s fate seems to be changing by the week. As recently as December, Yahoo was trying to spin off its 15 percent stake in Chinese e-commerce giant Alibaba, worth more than $25 billion. The spinoff was designed to let Yahoo off the hook for a tax bill of billions of dollars. But questions began to pop up about the spinoff after the Internal Revenue Service proposed new rules around taxing corporate spinoffs.
The company reversed course after pressure from investors, and in December said it may spin off everything but the Alibaba stake. That includes its ads business and consumer Web properties, such as Yahoo Mail and Sports.
Starboard, an activist investor group that owns less than 1 percent of the company, last month urged Yahoo to replace the majority of its board of directors and sell the business.
There’s no doubt it’s crunch time for Mayer, 40, who joined Yahoo after a 13-year stint at Google where she worked mostly on search user interfaces. Soon after she joined Yahoo, Mayer worked quickly to boost employee enthusiasm and retune the corporate culture, including giving all employees new smartphones and making the food in the cafeteria free.
But now morale among Yahoo’s more than 10,000 employees has sunk so low they are referring to Mayer as “‘Evita’ — an allusion to Eva Peron, the former first lady of Argentina whose outsize ego and climb to power and wealth were chronicled in the musical of that name,” The New York Times reported last month. More than a third of Yahoo’s workforce has left in the past year, the Times added, citing unnamed sources.
A Yahoo spokeswoman declined to comment on employee morale.
As for those workers, Yahoo said Tuesday it didn’t make the decision to cut staff “lightly and will make every effort to handle the process with thoughtfulness, transparency and compassion.”
