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Yahoo's earnings were quite disappointing in 2011, as its core advertising business struggles to keep up with giants like Google and Facebook. Even the new CEO, Scott Thompson, has failed to inspire confidence.
Thompson announced his intentions to focus on better monetization of Yahoo's online content, which generates almost all of its revenue. As part of his drive to create a leaner business, Yahoo has already discontinued several mobile apps and recently shut down Yahoo Meme, its micro-blogging service. Then mid-March, it filed a patent infringement suit against Facebook, which has unleashed a wave of criticism among tech watchers in what appears as as desperate move for a settlement or royalty fees.
Check out our complete analysis of Yahoo | Facebook
Wednesday morning Yahoo confirmed that it plans to lay off around 2,000 employees this week. [1] Most of the layoffs will be concentrated in the product divisions as well as its local, search and ad technology businesses. With this move, Yahoo plans to cut costs and improve margins.
Yahoo is also expected to restructure its businesses, let go of some of its non-performing ones and focus primarily on its online content properties and media business, which drive most of its revenue.
In case there was not enough to do at the beleaguered company, Facebook has now filed a counter-suit against Yahoo's patent infringement claims, which could draw cash strapped Yahoo into a drawn out legal dispute. With Facebook's IPO on the horizon, this created enough of an overhang that Facebook decided to refile its S-1 to disclose that its future business could be severely impacted by such claims. As such, we don't expect Facebook or other large peers to strike new partnerships with Yahoo that could help turn its business around.
We currently have a $18 Trefis price estimate for Yahoo, which stands nearly 20% above its market price.
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Notes:
- Yahoo?s Layoffs Tomorrow Morning of up to 2,000 Will Only Be the First Move of a Larger Purge to Come, AllThingsD [↩]
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