Date: Wednesday, January 30, 2008

Shares Slide as Yahoo announces Job Cuts and Poor Profits

Shares in Yahoo slid by 10 per cent yesterday, as the company announced a drop in fourth-quarter profits and job losses.

Yahoo reported a dramatic 23 per cent plunge in profits, which fell to $205.7 million in the fourth-quarter. While overall revenue rose by around 8 per cent, the future still looks decidedly shaky for the search engine giant.

In attempt to turn around the business, Yahoo co-founder and CEO Jerry Yang announced 1,000 job cuts – around 7 per cent of the Yahoo workforce – as well as a programme of other changes. He said: "We believe that the moves we are making will help us exit 2008 stronger and more competitive…We’re making profound, fundamental changes to virtually all aspects of our business.”

As most of the site’s revenue is generated through advertising, Yahoo’s recent financial struggles can be attributed to a decline in advertising spend, particularly in the travel, retail and financial sectors. However, analysts believe that the drop-off in advertising spend will affect Yahoo much more that its rival Google. This is because Google uses a pay-per-click (PPC) system for its search engine campaigns, which many businesses find to be a more cost-effective way of advertising.

Yahoo’s change in fortunes can also be attributed to a loss in popularity. While the search engine was once one of the most popular on the Internet, many people now use Google for internet searches. Similarly, the rise in social networking websites such as Facebook, Bebo and MySpace among young people has also rendered the site less popular.

Yahoo’s latest job losses are the largest amount of redundancies at the company since the dot-com crash. The company currently boasts around 14,000 employees, although it has yet to announce which jobs will be cut.

Source:

BBC

Guardian

Times