What’s the next strategy if you are Silicon Valley’s most infamous, yet most persistent, ‘also-ran’? Just having moved its paid ads over to Bing, and with early reports that it will layoff roughly 5 percent of its workforce (Merry Christmas!) as early as December 14, it seems that Yahoo! is all set to undergo yet another restructuring.
Reuters reports that, Yahoo “plans to lay off more than 600 employees as early as Tuesday,” December 14. Most of these cuts will reportedly be in Yahoo’s product group. Reuters notes that, “(t)he layoffs come two years into Chief Executive Carol Bartz's tenure, as Yahoo works to grow its revenue amid tough competition from Google Inc and Facebook.”
I’m no CEO, but it sure seems to me that with internet marketing and social media sites booming, and with online adverting revenue projected to grow 18 percent (according to Borrell Associates) and finally surpass print advertising buys for the first time ever, laying off a significant segment of a critical business – especially less than two weeks before the holidays – is either a concession that restructuring is badly needed, or a figurative ‘throwing-in of the towel.’ Layoffs may help your bottom-line but they won’t boost revenue, even if revenue is set to surge industry-wide.
The perennial question remains: How can Yahoo compete with Google? They aren’t in a position to bang away toe-to-toe. After all, Yahoo’s total value is only $22 billion.
A billion dollars, I reluctantly admit, isn’t what it used to be – particularly in a booming tech sector which threatens to turn into a Dotcom 2.0 bubble – but $22 billion is only two-thirds of Google’s reported $33 billion in cash reserves.
In a related posting on the New York Time’s DealBook blog, Andrew Ross Sorkin points out that, “(i)f there is one person who holds the key to the future of the American Internet also-ran, it may be [Masayoshi] Son, the 53-year-old billionaire founder of Softbank.” Softbank, Mr. Sorkin notes, “owns big chunks of Yahoo’s most valuable investment stakes: Yahoo Japan and the Alibaba Group, one of China’s largest Internet companies.”
Together, Yahoo Japan and Alibaba, when combined with Yahoo Inc.’s cash reserves, represent one-half of Yahoo’s $22 billion bookvalue, according to analysts’ estimates. Yahoo owns a 35 percent stake in Yahoo Japan, and a 40 percent stake in Alibaba; however, even the profitable Yahoo Japan conceded to Google’s dominance earlier this month, as it made Google the search engine on its home page.
While Mr. Sun is reportedly frustrated with the strategy of Yahoo’s management, and its CEO Ms. Bartz, and advocates an Asian acquisition program, some analysts are speculating that Yahoo may sell off its component parts – most notably its shares in Yahoo Japan and Alibaba – and take the remainder of the once-mighty company private.
“With Yahoo Japan outsourcing search to Google, Yahoo has several assets that do not have a lot of synergies,” observes Bank of America Merrill Lynch’s Justin Post, “and we think the sum of the parts is worth more than the whole.”
A break-up and sale of assets is wholly antithetical to Mr. Sun’s thinking. “If I were Yahoo’s U.S. C.E.O., I would have my own view and own approach,” he told Mr. Sorkin, while conceding that his approach “is always riskier.” “I always take bold moves. So it can have great return but with great risk,” he said. “I would be more aggressive to acquire companies or start a new business.”
That puts one of Yahoo’s biggest shareholders – and its biggest shareholder in the burgeoning Asian market – at loggerheads with its CEO. Given that the reported layoffs will be concentrated in Yahoo’s products division, it seems clear that starting a new business is not in the cards for the immediate future. So once again, Silicon Valley’s most infamous ‘also-ran; seems headed for at least one more restructuring – perhaps its last as a publicly traded company.
‘Tis the season, unfortunately, for those being cut from the Yahoo payroll. Fortunately, however, in the new year they will likely be snapped up by either the booming Facebook, or by a re-emergent Google fuelled for growth by the debut of the first-generation of cloud-only Chrome OS notebooks in mid-2011.
James Barry covers internet marketing and related topics for Wolf21.com, a Toronto-based firm offering a full line of SEO services.