Yahoo needs to trim down to about 12,000 employees to survive, and the lion's share of cuts – expected to be announced as early as Tuesday – are likely to be in ad sales, analysts said.
“It’s because Yahoo’s the leader in premium display, and that market has really gone south,” said Jeffrey Lindsay, an analyst with Sanford C. Bernstein & Co. And it won't be the only one to go, he said.
“If it was just the sales force, they probably wouldn’t be using consultants. It’ll be across the board,” he said.
Yahoo is expected to announce layoffs of at least 1000 people as part of its cost-cutting strategy, according to a number of recent reports. Its total staff was around 14,300 back in June.
Other analysts noted that the troubled economy makes sales a likely target for trimming, but that there could be layoffs in a number of other departments.
“I don’t know that they’re going to be cutting particularly in product development. It probably wouldn’t make sense to do that given that they need to continue to innovate and try to improve their products, but I think you’ll probably see at least something in almost every segment of the company,” said Stanford Group Company’s Clayton Moran.
Another key area that could be hit hard is search, which Yahoo has been backing off from lately, as an outsourcing deal with Google battles a
Justice Department investigation.
“They seem to be emphasizing less on search. Search R&D is a large area for them and the need for that I think goes down,” says Gene
Munster of Piper Jaffray & Co.
“Specifically I think probably the search has the most risk just because they’re obviously trying to figure out ways to lessen their exposure to that," he added. "So that’s the most logical place that could be cut back.”
Regardless of who ultimately gets the axe, Lindsay thinks the move should should have been made about 6 months ago.
“Yahoo’s problem is it tends not to take radical enough action,” he said, noting that it laid off 1,000 employees earlier this year but kept hiring. His company suggested last year that Yahoo cut a total of about
2,500 jobs.
“If you do it by small cuts, only just enough each time, you end up having to do it over and over and it’s disastrous for morale. That’s what happened at AOL,” he said.
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