REUTERS/Denis Balibouse
Yahoo CEO Marissa Mayer
Yahoo said the job cuts are part of a four-point "strategic plan for growth" that will streamline its product offerings and initatives and which Yahoo said should return the company "modest and accelerating growth" in 2017 and 2018.
Yahoo said it will explore additonal unspecified "strategic alternatives" in parallel to the comeback plan, noting that it will "engage on qualified strategic proposals" including the "reverse spin" where it sells its core assets and keeps its valuable Alibaba holdings.
Many investors are clamoring for Yahoo to sell its core internet business.
The changes come as Yahoo CEO Marissa Mayer is under fire from investors, more than three years into a turnarnound plan that has so far delivered little payoff. Yahoo's stock is down nearly 40% from its 52-week high and activist investors are calling for the company to be sold and are threatening a proxy fight to replace the company's directors.
Yahoo has reportedly cut off talks with potential acquirers, as it presses ahead with its own plan to separate its core internet business from its holdings in Chinese ecommerce giant Alibaba and Yahoo Japan, in a complex "reverse spin out" that Yahoo has said could take more than one year to complete. Yahoo re-iterated its commitment to separating the core business from the Asian assets on Tueday.
Shares of Yahoo were down 1.4% at $28.65 in after hours trading on Tuesay.
Yahoo said on Tuesday that it would explore the divestiture of "non-strategic assets," including real estate and patents, that it estimated could fetch between $1 billion and $3 billion in cash.
The layoffs, which Business Insider reported were coming, come as CEO Marissa Mayer looks to streamline the company and narrow its focus on fewer products.
Yahoo said the job cuts will primarily come in Q1, and that it will close five overseas offices in Dubai, Mexico City, Buenos Aires, Madrid, and Milan.
Yahoo announced the changes alongside its fourth quarter financial results on Tuesday.
Here is the four-point plan that Yahoo announced on Tuesday:
Play to Strengths to Grow User Engagement. Yahoo has grown into a guide to digital information discovery for more than one billion monthly active users. In 2016, the Company will prioritize growing engagement with its enormous user base. Yahoowill simplify its product portfolio to emphasize the products that distinguish the Company competitively and drive the most substantial portion of users, revenue, and market opportunity. This focus will increase the pace of innovation and product improvement, deliver a more deeply integrated Yahoo experience and more quickly grow key metrics such as page views, logged in users, and DAUs.
For consumer products, Yahoo will consist of three global platforms: Search, Mail, and Tumblr, and four verticals: News, Sports, Finance and Lifestyle in growth markets like the U.S., Canada, U.K., Germany, Hong Kong, and Taiwan. For advertisers, Yahoo will be defined by two core offerings: Gemini and BrightRoll. Gemini combines search and native ads for superior results, while BrightRoll offers programmatic buying and selling tools for video, display and native
For Yahoo's search business, mobile search is the biggest opportunity. The Company will shift most of the resources in this area toward more forward-leaning mobile search investments, positioning it to redefine search for mobile devices, which will help drive sustainable long-term growth and differentiation.
Yahoo Mail is the heart of the Company's communications products. To continue to grow DAUs and increase engagement, investment in Yahoo Mail will be used to improve speed and stability, as well as add features that make it easier for users to share, search and connect through the platform. As an essential driver of the Company's entire product portfolio, focused investment in Yahoo Mail will help accelerate growth across the business.
For the Tumblr platform and Yahoo's digital content strongholds of News, Sports, Finance, and Lifestyle, investment will be focused on growing user engagement, especially on mobile. The Company will invest in features and experiences that engage users as both consumers and creators of content, encouraging them to do more with, and therefore spend more time on, the Yahoo network.
Drive Mavens Revenue Growth. Yahoo will continue to invest in the Mavens strategy to counterbalance legacy business declines with an emphasis on mobile. Mavens revenue exceeded $1.6 billion in GAAP revenue in 2015, a 45 percent year-over-year increase that surpassed our forecast. Focus on engagement growth and improved monetization for the core consumer products, together with the syndication of mobile tools through the Yahoo Mobile Developer Suite, Yahoo expects to drive long-term sustainable revenue growth and reach more than $1.8 billion in Mavens GAAP revenue in 2016.
Advertiser spend in Mavens areas is projected to increase significantly. Mobile industry ad spend is anticipated to nearly double by 2018, and programmatic technology has become the proven advertising solution for optimal performance, pricing and control. In response to these trends, Yahoo's global sales team has already begun to shift toward performance and programmatic offerings and the Company has already seen the benefits of this in Q4. This strategy, plus the work that's been done over the last two years with Mavens-focused ad formats and investment in Gemini and BrightRoll platforms, positions Yahoo well to ride these trends toward sustainable growth.
Simplify the Business to Improve Execution. In 2016, a smaller product portfolio emphasizing Yahoo's core strengths will yield better focus, execution, and ultimately clearer value to shareholders, advertisers and users. Since 2012 the Company has invested across different product areas and markets to drive innovation and fuel growth and now it will align resources towards proven growth areas. In Q4 the Company closed Yahoo Screen and shifted away from original scripted content. In 2016, Yahoo will consolidate some Digital Magazines under one of our four core verticals, while others will be shut down. The Company will also exit legacy products, including Games and Smart TV, which have not met growth expectations. A simpler product portfolio more focused on Yahoo's strengths will allow the Company to more quickly improve offerings to increase profitability.
In addition to a clarified product portfolio, Yahoo has begun to explore divesting non-strategic assets of value such as the responsible monetization of non-strategic patents, the sale of valuable real estate, and other non-core, non-strategic assets. Through the end of the year, the Company estimates that these efforts could generate between one and three billion dollars in cash.
Efficiently Align Resources. Yahoo's plan reflects the Company's goal to continue to spend thoughtfully, operate effectively, and drive profitability. As part of this plan, the Company has begun executing on a number of additional cost-savings efforts. Since 2012, Yahoo has already made significant strides to manage headcount and achieve stability with fewer employees. Yahoo values everyone who has dedicated themselves and made contributions to the Company. The changes in the employee footprint have not been easy, but are necessary to position the Company for a stronger future.
To that end, Yahoo plans to reduce our workforce by roughly 15 percent and exit five offices in Dubai, Mexico City, Buenos Aires, Madrid, and Milan, subject to local laws and consultation processes. It's expected that most of these changes will take place in Q1, but by the end of 2016, the Company anticipates having approximately 9,000 employees and fewer than 1,000 contractors. This represents a workforce that is roughly 42 percent smaller than it was in 2012 and will result in savings in short term operating expense of $400 million annually. Yahoo does not take this decision lightly and will make every effort to handle the process with thoughtfulness, transparency, and compassion.