Yahoo cutting workforce by 15% after announcing $4.4bn loss

Yahoo chief executive Marissa Mayer has announced plans to cut the company’s workforce by 15% and close five foreign offices by the end of 2016.

The struggling tech company reported a $4.4bn loss for the last three months of 2015 as it wrote down the value of assets including Tumblr, the blogging site it bought for $1bn in 2013.

Mayer, a former high-flying Google executive, has come under pressure from activist shareholders unhappy with her tenure. She announced an “aggressive strategic plan” that is expected to lead to the sale of parts of its business.

Mayer blasted “falsehoods” she said had been circulating in the media, including reports that the company had spent $7m on its holiday party and $4m on a food program. Yahoo is a “far stronger, more modern company than the one I joined three and a half years ago,” she told analysts.

Yahoo’s fourth quarter earnings for 2015 were better than expected, coming in at $1.27bn. Overall, the revenue for 2015 was $4.9bn, up from $4.6bn the year before. But the company’s traffic acquisition costs (TAC), the amount Yahoo spends to attract users to its websites, rose to $271m in the fourth quarter, up from $74m a year earlier.

Activist investor Starboard contacted the Yahoo board as the results were released demanding a change in management. Board member Charles Schwab announced he would step down as the results were announced.

Yahoo said its strategic plan would simplify the company and narrow its focus. While revenue has gone up, Yahoo shares have fallen 33% over the past year. Over the past three months they have fallen by 17%. Its shares fell in after-hours trading.

As part of its plan, Yahoo:

• is expected to exit offices in Dubai, Mexico City, Buenos Aires, Madrid and Milan by end of the first quarter in 2016.
  
• expects its workforce to be down to 9,000 and have fewer than 1,000 contractors by end of 2016.

“Today, we’re announcing a strategic plan that we strongly believe will enable us to accelerate Yahoo’s transformation,” said Mayer. “This is a strong plan calling for bold shifts in products and in resources.”

The company also reinforced its commitment to spinning off its $31bn stake in Alibaba, the Chinese e-commerce business.

“Separating our Alibaba stake from our operating business continues to be a primary focus, and our most direct path to value maximization,” said Maynard Webb, Yahoo’s chairman. “In addition to continuing work on the reverse spin, which we’ve discussed previously, we will engage on qualified strategic proposals.”

The job cuts announced on Tuesday are not the first round of layoffs under Mayer. About a third of Yahoo’s workforce has left either voluntarily or involuntarily over the last year.

Even as Yahoo contemplates further cuts, one former employee has filed a lawsuit in federal district court in San Jose, California, alleging that Yahoo’s employee ranking system allowed senior managers to fire hundreds of employees without just cause. The California department of fair employment and housing is investigating Yahoo’s use of the rating system.

‘Dead elephant in the room’

The lawsuit is not the only issue that Yahoo has had to address in the past couple of weeks.

A small group of activists began the morning with a protest outside Yahoo’s San Francisco offices, calling attention to what they call “the dead elephant in the room”: Yahoo Japan’s sale of ivory products on its online auction site. More than a million people have signed a petition circulated by online advocacy group Avaaz calling on Yahoo Japan to follow the lead of other online retailers like Google and Amazon in banning the sale of ivory.

The protesters erected a seven-foot-tall inflatable elephant outside the company’s doors and distributed copies of the San Francisco Chronicle, which contains a full-page advertisement urging Mayer to “stop the bloody ivory trade”.

Yahoo Japan is a joint venture between Yahoo and the Japanese telecoms firm SoftBank. On 27 January, Yahoo released a statement emphasizing that, while Yahoo Inc does not allow the sale of ivory, the company does not control policy for Yahoo Japan. In the statement, Yahoo Inc said it was asking Yahoo Japan “to reexamine and to clarify their company’s policies” toward sales of products from endangered species.