Yahoo to look at strategic alternatives, cut jobs, alongside spin-off

Yahoo Inc said on Tuesday it would consider "strategic alternatives" for its core Internet business and cut about 15 per cent of its workforce, even as it continues with its plan to revamp the business and spin it off.

The announcement is the strongest sign yet that the board and Chief Executive Marissa Mayer may be willing to sell the struggling Internet business - essentially websites, email and online search - under growing pressure from impatient shareholders.

Investors were not immediately impressed, sending Yahoo shares down 1.2 per cent after hours. They have now fallen 36 per cent over the past 12 months. "We believe the strategic plan does not fully address the core issues which have destroyed shareholder value - poor capital allocation, bad strategic partnerships, out of control spending and a bloated workforce," said New York-based SpringOwl Asset Management, a shareholder which has called for changes at the company.

Yahoo was a web pioneer in the 1990s but its revenue peaked in 2008 and it has been unable to keep up with Alphabet Inc's Google and Facebook Inc in the battle for online advertisers, even though it still runs some of the world's most-read websites.

The company said on Tuesday it would close offices in five locations, pare down its products, shift more resources to mobile search, and sell some non-strategic assets such as real estate and patents.

It will have three main consumer-focused platforms, Search, Mail and Tumblr, and four "digital content strongholds" in the form of News, Sports, Finance and Lifestyle.

The changes are designed to increase revenue from what it calls "mavens," for mobile, video, native and social advertising, to US$1.8 billion (S$2.6 billion) this year from US$1.66 billion in 2015, cut operating costs by US$400 million by the end of the year, and possibly generate more than US$1 billion from asset sales. "We believe these changes will improve our course and institute a positive trajectory on our earnings," said Mayer on a call with analysts.

Wall Street did not appear to be convinced. "In a business that's kind of booming from an industry standpoint ... if the only thing you can come out and tell me is you're going to cut people to try to restore profitability through headcount, there's something huge missing here," said Martin Pyykkonen of Rosenblatt Securities.

Mayer dismissed accusations of excessive spending, denying what she called an inaccurate report of a $7 million bill for its holiday party, saying the figure was exaggerated by a factor of three.

Yahoo reported a 15-per cent drop in adjusted quarterly revenue - after deducting fees paid to partner websites - to US$1.00 billion from US$1.18 billion as it struggles to keep its share of online search and display advertising in the face of tough competition.

Mayer, who joined Yahoo in 2012 from Google, has been trying to revive the company's core media and online advertising business by spending money to draw more users to its websites.

She proposed in December that Yahoo spin off its main business, which includes its search engine, digital advertising units and its email service, after Yahoo abandoned efforts to sell its stake in Chinese e-commerce giant Alibaba Group Holding Ltd.

The company reported a loss of US$4.43 billion, or US$4.70 per share, in the quarter, due to a large write-down to account for the lower value of some units. That compared with net income of US$166.3 million, or 17 cents per share, a year earlier.

Excluding items, Yahoo earned 13 cents per share, in line with analysts' average expectations.