The proverbial do-or-die time is upon Yahoo. Yahoo’s plan to reduce workforce and close down various offices which includes the once 200-staffed office in Dubai, became official after the release of its fourth quarter reports. Despite beating revenue expectations, Yahoo has to take some drastic steps to keep the company going.
“We’re embarking on a strategic plan that we strongly believe will enable us to accelerate Yahoo’s transformation. The Board also believes that exploring additional strategic alternatives, in parallel to the execution of the management plan, is in the best interest of our shareholders. Separating our Alibaba stake from our operating business continues to be a primary focus, and our most direct path to value maximization. In addition to continuing work on the reverse spin, which we’ve discussed previously, we will engage on qualified strategic proposals,” said Maynard Webb, Chairman, Yahoo in a prepared statement.
Gearing Up For A Sale
The company is gearing up for some significant restructuring in the first quarter of 2016. Yahoo will close down five offices and cut the workforce by 15 percent by the end of 2016. That would bring its total fulltime workforce to 9,000 employees, which is around 42 percent lower than its 2012 count. These cuts will result in savings of USD 400 million annually, according to the company.
Additionally, Marissa Mayer, CEO, Yahoo said the company is focused on a reverse spin-off of the company’s multi-billion stakes in Alibaba and Yahoo Japan as a way to return that value to investors. That is a move that would enable the sale of Yahoo’s core business, a move many investors and analysts have been shouting for years.
While the revenue generated for the year was USD 4.96 billion, up 8 percent from the previous year, Yahoo suffered a net loss of USD 4.35 billion for the year 2015. This was mainly due to a USD 4.5 billion goodwill impairment charge, indicating the company might have overpaid for some of its startup acquisitions. However, Yahoo delivered revenue of USD 1.27 billion for the quarter. This beats the analysts’ expectations of USD 1.19 billion.
Mavens: Too Little, Slightly Late
Breaking down the revenue for Q4 2015, Yahoo’s net search revenue was USD 381 million, a decline of 18 percent. Net display advertising revenue was USD 472 million which is 2 percent above the previous year. The company also flaunted growth of its ‘Mavens’ businesses (mobile, video, native and social), which generated USD 472 million in revenue for the fourth quarter of 2015, a year-over-year increase of 26 percent.
While Yahoo will focus its efforts around its search, mail and Tumblr products in U.S., Canada, U.K., Denmark, Hong Kong and Taiwan markets, the company announced plans to close its offices in Dubai, Mexico City, Buenos Aires, Madrid and Milan. Yahoo will also continue to grow its verticals in news, sports, finance and lifestyle. “These actions are part of a strategic plan designed to simplify the company’s business and narrow its focus and to improve operational and cost efficiency,” Yahoo said in a government filing.
End Of MENA OPs
The Dubai office, was the company’s only Middle East operation following the closure of offices in Amman and Cairo. The company which once employed 400 people in the Middle East has given the notice to the last 50 members at their office in Internet City of Dubai about the closing in April 2016.
Yahoo also plans to shut down certain products, such as some of the digital magazines launched under Mayer’s leadership as well as Yahoo Games and Yahoo Smart TV. The company will also reel in its efforts with other products, such as Flickr. Yahoo’s steps to streamline operations have included shutting down Yahoo Screen, the video service that was the base to licensed programming and originals including the ‘Community’ from Sony Pictures Television.
“This is a strong plan calling for bold shifts in products and in resources,” Ms Mayer said, adding, “This plan builds from that achievement and will dramatically brighten our future and improve our competitiveness, and attractiveness to users, advertisers and partners.”
Yahoo’s forecasting annual revenue for 2016 is in the range of USD 4.4 billion to USD 4.6 billion, lower than what it generated in 2015. “The year 2016 will very much be a transition year, with revenues and earnings expected to decline, returning to modest but accelerating growth in 2017 and 2018,” Ms Mayer said.
The past couple of years have been tough for Marissa Mayer, as she has tried to put Yahoo on the map again. Unfortunately, the revenue has kept declining and many executives are exiting the company.
