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Yahoo firing 1,500 workers; 3Q profit falls 64%

(Agencies)
Updated: 2008-10-22 06:37

SAN FRANCISCO - Yahoo Inc. will fire at least 1,500 workers to cope with a crumbling economy that dented its third-quarter profit and turned up the heat on the Internet company's management as investors stew over a missed opportunity to sell to Microsoft Corp. for $47.5 billion.

A Yahoo worker waves to another worker outside of Yahoo offices in Santa Clara, Calif., Tuesday, Oct. 21, 2008. Mired in a deep slump, Yahoo will fire at least 1,500 workers to cope with a crumbling economy that dented its third-quarter profit and turned up the heat on the Internet company's management as investors stew over a missed opportunity to sell to Microsoft Corp. for $47.5 billion. [Agencies]

The purge outlined Tuesday represents a 10 percent reduction in Yahoo's payroll of about 15,000 employees. It's the second time in nine months that Yahoo has resorted to mass layoffs in what so far has been an ineffectual effort to rebound from a financial funk that has left its stock price near a 5{-year low.

Things got worse in the third quarter as Yahoo earned $54.3 million, or 4 cents per share. That was a plunge of 64 percent from $151.3 million, or 11 cents per share, at the same time last year.

The profit in the latest quarter was knocked down by nearly $37 million in fees that Yahoo incurred during its negotiations with Microsoft and an unsuccessful attempt to replace its board of directors. Yahoo also absorbed a $30 million charge to account for the diminished value of an investment in Alibaba.com, one of China's top Web sites.

If not for those one-time items and changes in its tax rate, Yahoo said it would have made 9 cents per share. That figure matched the average earnings estimate among analysts surveyed by Thomson Reuters.

Revenue rose 1 percent to $1.79 billion. After subtracting commissions paid to advertising partners, Yahoo said its revenue stood at $1.32 billion - about $50 million below analyst estimates.

Yahoo's determination to rein in its expenses seemed to please investors, who have been disillusioned with the Sunnyvale, California-based company's direction for years.

Yahoo shares edged up 30 cents, or 2.9 percent in extended trading after ending the regular session at $12.07, down 79 cents.

The depressed stock price is particularly galling to Yahoo stockholders, given that Yahoo had a chance to sell to Microsoft for $33 per share in May.

But Microsoft withdrew its offer after Yahoo Chief Executive Jerry Yang balked at the price because he believes his turnaround plan would yield even bigger returns.

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