Yahoo confirms layoffs loom

Hundreds are expected to lose jobs

Yahoo is widely expected to undertake significant layoffs this week and dump several underperforming businesses as the struggling portal continues to reorganize its business operations.

The Sunnyvale, Calif.-based Web giant has declined to provide specifics on the number of employees that will be let go — estimates have ranged from 5%-10% of its work force, or hundreds of staffers.

Officials confirmed Tuesday that some segments of the company will be phased out.

"Yahoo has embarked on a multiyear transformation that includes making some tough decisions about the business to help the company grow," Yahoo said. "Yahoo plans to invest in some areas, reduce emphasis in others and eliminate some areas of the business that don't support the company's priorities."

The past 12 months have been marked by significant change at Yahoo — which is still the largest property on the Web, according to comScore. In 2007, CEO Terry Semel was ousted, to be replaced by company founder Jerry Yang, and several top executives departed, including former head of sales Wenda Harris Millard.

Yahoo continues to struggle to catch Google in the search advertising race, while it simultaneously faces the need to adapt to a rapidly changing online media market — one in which fewer users rely solely on portals to navigate the Web.

JPMorgan Internet analyst Imran Khan said Tuesday that layoffs at Yahoo should eliminate redundancies and help reduce costs significantly. According to his firm's estimates, Yahoo pulls in far less revenue per employee than its peers. "Reductions should put Yahoo more in line with industry productivity levels," he wrote.

Kahn said that if Yahoo cuts 5% of its work force, the firm should save $100 million in 2008. But its doubtful that layoffs will result in more new cash flowing to the company.

"Layoffs should have no material impact on revenue," he wrote. "We do not see this having a material impact on '08 revenue."

Mike Shields is a reporter for Ad Week.