Yahoo cuts jobs, seeks to fix past mistakes

Andrea Orr

SUNNYVALE: Yahoo! Inc, trying to reinvent itself as a mature Internet

company, said on Thursday it will reduce its workforce by about 300 employees,

or just under 10 per cent, and eliminate some weak divisions as part of a broad

restructuring designed to generate more profits.

The company, which outlined its plans at an analyst meeting at corporate

headquarters here, also said it was working to fix some old mistakes like an

emphasis on youth over experience, speed over sound strategy, and arrogance.

Yahoo, once known for its youthful management team, breakneck rate of growth

and steep stock appreciation, has more recently felt the pain of an economic

downturn as well as a scattered strategy that was not always focused on the

bottom line.

The company said it will actually cut 400 jobs but it will continue to hire

people to build up key business areas. It expects the net job reduction to be

about 300. Most of the jobs being cut, it said, will come out of its

international and broadcast divisions, and from middle management.

Thursday's meeting was the first time that Terry Semel, Yahoo's chief

executive of the past seven months, has outlined a broad plan to turn things

around. Referring to the company's old strategy to "get big fast by

providing a broad set of Web services," Semel remarked, "That couldn't

possibly be the strategy going forward."

Specifically, he said that while Yahoo will continue to focus on selling

advertising to support its site, it will move to achieve more of a 50-50 balance

between advertising revenues and those generated from fees on business and

consumer services. Advertising, which is expected to account for 76 per cent of

total company revenues this year, should come down to 50 to 60 per cent of the

mix by 2004, Semel said.

Business climate still tough



Another major prong of the new strategy involves collecting money from more of
the 218 million people who regularly visit Yahoo. Semel said he hoped, within a

"reasonable" time period, to achieve "a direct billing

relationship" -- through subscriptions and other fee-based services -- with

some 10 million of Yahoo's users. He gave no specific time target for that goal.

The company also reaffirmed most of the earlier financial guidance it has

provided, calling for fourth quarter revenues of between $160 million and $180

million and earnings of break-even to a penny a share.

It said it sees revenues next year of between $725 million and $785 million a

share, and earnings -- before interest, taxes, amortization and depreciation --

of $35 million to $75 million.

Yahoo stood by its earlier forecast that the troubled advertising business

was not likely to turn around before the second half of next year, and said the

precise timing of such a rebound remained unclear.

During the all-day meeting, various Yahoo executives filled in more of the

details of the turnaround strategy, which essentially centers on making more

money from all the 218 million people who use Yahoo services. Currently, the

company said it brings in about $3.21 per year from each visitor, although it

maintains there is vast potential to increase that amount through more

advertising and marketing and more paid services.

As part of a previously announced plan to eliminate fluff from the site,

Yahoo said it would cut some lifestyle, small business and business-to-business

marketplace features. It is also scaling back its focus on online greetings and

local content by pursing partnerships with other businesses.

Maturity is in



The company also devoted considerable time to explaining how it thought it could
grow its advertising and marketing business, by offering a broader set of

products that went beyond plain banner ads and took advantage of all the

consumer data it had collected.

But beyond the specific business plans announced there was a broader sense

that Yahoo was striving to change its culture. Thursday's event was marked by

more gray haired executives, who displayed an uncharacteristic humility and

acknowledged that the company's problems would need to be addressed at the

roots.

Wenda Millard, the recently appointed Chief Advertising Sales Officer, even

offered an "in" and "out" list. In a reference to some

criticism that the company had been unresponsive to business partners she said

that cooperative relationships were in and the "my way or the highway"

attitude was out. Millard said the customer was in and arrogance was out.

In stark contrast to Yahoo's early days as a start-up founded by two young

graduate students, maturity is apparently also in. Greg Coleman, Yahoo's

executive vice president who is actively involved in building more marketing and

advertising partnerships said, "You can't do it with youth and

enthusiasm."

Coleman said that the company had recently hired 30 new ad sales people, who

were for the most part 40- or 50- something and had years of experience and

established contacts with the major ad agencies.

"It makes you sleep well at night," he said.

(C) Reuters Limited.