Struggling Yahoo To Cut 5 Percent Of Staff

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Microsoft and Yahoo have been in discussions over a possible partnership in display and search advertising.

Yahoo plans on slicing 5 percent of its global work force as part of its efforts to streamline the search engine company and reverse its fortunes.

According to its latest quarterly report, Yahoo took a beating from the recession, reporting revenues of $1.58 billion (£1.07bn) for the first quarter of 2009, down 13 percent from the same quarter in 2008.

In an April 21 earnings call, Yahoo CEO Carol Bartz emphasised that her company’s survival and possible future profitability would rest on several key factors, including globalising Yahoo’s platform, building products that engage users and making more money from an engaged user base.

Bartz also announced that there would be a 5 percent reduction in Yahoo’s headcount, calling the job cuts “a natural outgrowth of the work we’re doing to streamline” Yahoo. Those personnel reductions also reflect Yahoo’s attempt to “eliminate duplication of effort.” Right now, Yahoo employs about 13,600 people worldwide.

Bartz had no comment about the possibility of a deal between Yahoo and Microsoft over search or advertising, but she did say the search business remains “critical to Yahoo.”

Heading into the call, analysts expected Yahoo to announce earnings in the neighborhood of 8 cents per share on $1.2 billion (£800m), down from 11 cents per share and $1.35 billion in net revenue for the same quarter in 2008.

The global recession has taken its toll on online advertising, a revenue pillar for Yahoo and search competitors such as Google. On April 16, Google reported that its first-quarter 2009 revenues had declined 3 percent from the fourth quarter of 2008.

“Google is absolutely feeling the impact” of the recession, Google CEO Eric Schmidt said during his company’s earnings call.

In addition to wrestling with economic conditions, Yahoo is still recovering from 2008’s disastrous takeover bid by Microsoft, which resulted in the search engine company’s stock taking a nosedive. Former Yahoo CEO Jerry Yang stepped down on 17 Nov, 2008.

However, a Reuters report in April said Microsoft CEO Steve Ballmer was in discussions with Bartz over a possible partnership that would likely revolve around sharing responsibility for the two companies’ advertising businesses; according to the report, one of the ideas on the table was for Microsoft to take charge of Yahoo’s search advertising business, while Yahoo would run the collective display advertising business.

Both companies declined at the time to verify the reports. In March 2009, Bartz said any discussions over search or other matters between Yahoo and Microsoft would be conducted “privately.”

Were Microsoft and Yahoo to join together in some sort of advertising alliance, or even merge their search operations, they would find it difficult at this juncture to overcome Google’s dominant market share. According to a report issued by research company ComScore, Google held 63.7 percent of the core search market in March 2009, while Yahoo held 20.5 percent and Microsoft had 8.3 percent.

A similar report issued by the Nielsen Company found that Google held 64.5 percent of the search market, followed by Yahoo Search with 15.8 percent and MSN/Windows Live Search with 10.3 percent.

Despite its troubles, Yahoo has been continuing to roll out new products and make itself more open to developers. In addition to enhancing SearchMonkey by integrating Flash video, games and slides into search results, the company has also been developing Facebook applications such as Friends on Fire, which uses Yahoo’s Fire Eagle geolocation platform to display acquaintances’ locations on a map.

Yahoo also continues to enjoy an advantage in number of e-mail users. Reports pegged Yahoo Mail at 91.9 million users in 2008, compared with Google Gmail’s 29.6 million users. AOL Mail finished second with 46.6 million unique users