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Yahoo job cuts are expected
Thursday, November 15 2001
by Matthew Clark

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According to reports, Yahoo is to announce a restructuring plan that will result in a 10 percent to 15 percent reduction in the firm's workforce.

Following an analyst meeting on Thursday night, the Internet giant is expected to announce that it will cut around 400 workers as part of a major reorganisation. While details of the move remain sketchy, it is thought that the California-based company plans to reduce its number of business units from 44 down to as few as eight. The company already announced 425 job cuts in April.

As the technology and Internet downturn deepens, in the past 18 months Yahoo has been struggling to capture the advertising revenues that it is dependent on. In April of this year, Terry S. Semel became the chairman and chief executive officer of Yahoo. He implemented a new strategy for the company, forcing it to attempt to diversify its revenue streams as the well of Internet advertising spend began to dry up.

Currently about 80 percent of Yahoo's revenues come from advertising and marketing fees which have fallen rapidly and severely impacted its bottom line.

In the last quarter the company announced losses of USD24.1 million, or USD0.04 per share, compared with a profit of USD47.7 million, or 0.08 per share in the same period a year ago. Sales in the period fell from a hearty USD295.5 million to USD166.1 million. Currently there is no indication that there will be any change in weakened market for Internet advertising.

The company's attempt to deliver revenues from other channels saw it announce on Thursday that it will offer services in conjunction with SBC Communications Inc. The two firms will jointly offer high-speed Internet access over SBC's lines using the Yahoo brand.

"This alliance enables Yahoo and SBC to create deeper relationships with millions of broadband and dial-up subscribers, and provides the 30 million Yahoo users in SBC's region with a unique, integrated access and premium service offering on a subscription basis," Semel said in a statement.

The two companies will pair SBC's DSL service with an enhanced version of Yahoo which includes video conferencing, games and other features that can exploit the fast Net connection. Additionally, the two firms will create a version of the service for dial-up users.

It is understood that the deal will see Yahoo receive a portion of the fees collected from the service and SBC will receive a share of the income from the advertising. The venture is due to be launched in mid-2002 and SBC will encourage its 3.6 million subscribers, including 1.2 million DSL subscribers, to upgrade to the Yahoo-SBC service. Separately, SBC said it planned to eliminate the brand name for its recently acquired Prodigy Internet service.

Yet some industry watchers remain sceptical that the arrangement will enhance Yahoo's bottom line to any significant degree since the company must surrender a portion of its advertising earnings to the ISP.

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