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

(Agencies)
Updated: 2008-10-22 08:32

Besides pruning its payroll, Yahoo is considering closing some of its US offices and sending some work to lower-paid workers overseas.

Exterior view of Yahoo headquarters in Sunnyvale, Calif., Monday, Oct. 20, 2008. Yahoo Inc.'s management will be on the hot seat again Tuesday when the embattled Internet pioneer is scheduled to release its third-quarter earnings after the market close. [Agencies]

Yahoo is approaching these cutbacks much more aggressively than its last round of layoffs in February, when about 1,000 workers were cut loose. Within a few months, Yahoo's payroll had expanded back to where it was before the streamlining.

Like most Internet companies, Yahoo relies on advertising for most of its profits.

Reflecting the downturn, Yahoo lowered its revenue estimates for the remainder of the year. Now Yahoo projects 2008 revenue of $7.18 billion to $7.38 billion, down from a forecast of $7.35 billion to $7.85 billion issued three months ago.

The downturn hasn't derailed Yahoo's biggest rival, Internet search leader Google, which last week reported a 26 percent increase in its third-quarter profit.

But Yahoo is more vulnerable to advertising cutbacks because its marketing system doesn't work as well as Google's and it is more reliant on billboard-type ads that are more difficult to sell in tough times. Google, in contrast, specializes in text-based ad links that cost advertisers only when the ads are clicked on.

Search advertising bolstered Yahoo during the third quarter, with revenue in that segment rising 17 percent to $438 million. But graphic-rich "display" advertising edged up just 3 percent while ads that Yahoo shows on its partners' Web sites plummeted 10 percent as bank and retailers curbed their spending.

Yahoo hopes to boost its revenue by drawing upon Google's technology for some of the text ads shown on its Web site, but the proposed partnership is in limbo while the US Justice Department investigates whether the alliance would undermine competition. Together, Google and Yahoo control more than 80 percent of the US search advertising market.

Yang told analysts that Yahoo and Google are still trying to persuade US regulators to allow the companies work together, but didn't specify a timetable for resolving the impasse.

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