Yahoo is a business under pressure and has been reported as such for a considerable period of time. Chief Executive Officer, Marissa Mayer, is under pressure from investors to cut costs and one of the easiest ways to do this is, unfortunately, to lose staff and sell on or close down business units. We are seeing reports that Marissa currently has a list of Yahoo’s existing business units and each has three choices: invest, maintain or kill. It appears that the Chief Executive is taking the knife to the business in order to reduce costs and streamline things such that it is a more profitable business for the coming months and years. The story is that the process will start with what has become something of a Yahoo characteristic over the last few months: staff will be reduced under the cover of using performance metrics. In other words, those staff and business units that do not meet Yahoo’s performance criteria are in danger of being let go. However, unlike previous layoffs using this technique, Yahoo is expected to follow up on this in February with more substantial layoffs.
As for the individual business units, it is believed that the mobile search technology will be invested into. Yahoo’s core media websites, such as Yahoo Finance, will be maintained and the lower performing media websites and various international assets will be killed off. The scale and nature of these cuts is expected to be revealed in early February when the company announces its earnings. The market is expecting the earnings data to be muted at best, not helped by what appears to be something of an exodus of key staff from a number of Yahoo’s business units. There are rumors that Craig Whitmore, Platform Sales Vice President, is leaving Yahoo together with another six influential executives.
One possible event is that Yahoo will be bought by another business. The rumor is that Yahoo is not setting itself up to be sold although it lists both J.P. Morgan Chase and Goldman Sachs as advisers. We have seen large companies in the telecommunications and media sectors, such as AT&T, NewsCorp and Verizon Wireless, showing some interest in Internet companies and an estimated valuation for Yahoo is between $6 to $8 billion, after separation from the Alibaba Group assets. Yahoo is also facing the potential for activist investors wanting a change of board directors, where we have seen rumors that Starboard Value is to nominate changes. The next few weeks are likely to be very eventful for Yahoo and its board of directors.