Updated from 3:34 PM EST
In a restructuring that Wall Street has awaited for months,
on Thursday announced sharp cutbacks in the number of operating units, plans for layoffs of 400 employees, and a comprehensive strategy to focus on diversified profits rather than growth.
Reaffirming its financial targets for this year, the Internet bellwether -- which has seen its sales fall 37% from 2000 -- forecast revenue growth for 2002 ahead of analysts' estimates and predicted a return to double-digit revenue growth in 2003 and beyond.
Yahoo!'s shares fell 38 cents to close at $14.83 Thursday, then dropped 2 cents more in after-hours trading on Island.
Yahoo!'s restructuring, disclosed at the company's third annual meeting with Wall Street analysts, finally cast light on some of the strategies behind Yahoo!'s ongoing efforts to find more revenue beyond online marketing, as well as some of the financial goals the company is hoping to reach.
The Thursday presentations, which follow the replacement earlier this year of longtime chairman and CEO Tim Koogle with entertainment industry veteran Terry Semel, also hammered home the company's not-so-subtle message that youthful enthusiasm can take Yahoo! only so far, and that it needs more seasoned hands on deck to execute its forthcoming plans.
Those plans include cutting Yahoo!'s advertising revenue from the 76% of total sales expected in 2001 to about 50% of sales in 2004, Semel said.
In place of 44 different business groups and 14 business units, the company is dividing its business into six different units: listings access, commerce, communications, media & information, and enterprise -- or business -- solutions. Of the previous business structure, Semel said, "I found it too difficult to manage."
Distinguishing each of these businesses, according to Yahoo! President Jeff Mallett, is that they: represent $100 million-plus businesses for Yahoo!, either now or in the future; have high growth potential; represent proven financial models; and leverage Yahoo!'s core strengths.
The company publicized its venture into one of those businesses, online access, only Wednesday, with the
announcement of a co-marketing agreement with
In the first part of its daylong presentation, the company announced a variety of efforts and goals it had for focusing its priorities. Those include:
- The above-mentioned layoffs, which follow job cuts of 365 positions earlier this year and amount to about 12% of the workforce. Three-quarters of the cutbacks, Mallett said, will come from international operations, Yahoo!'s broadcast operations -- the performance of which the company referred to in almost apologetic tones -- and the changes from the business group consolidation and new reporting structure. Offsetting the layoffs, Mallett said, are the company's plans to hire 100 people to cover new areas.
- Overhauling the company's sales force, in part by hiring 30 new salespeople and 10 more by year's end. These new efforts, according to Greg Coleman, executive vice president of North American operations, should enable the company to build its online advertising market share over the next year. If the overall market stays flat, "We will grow very nicely," he said. Chief advertising sales officer Wenda Harris Millard added, "We will not be dependent on an advertising market comeback. ... I think in the next six months you will see a significant number of relationships unfold from our current activities."
- Acquiring certain businesses, particularly those that will help the company generate transaction fees, rather than just being an "agent" for connecting consumers with what they want.
- Making money from paid search and directory listings, which Semel characterized as a very large business that the company has "left on the table for years." To that end, Yahoo! recently announced a deal with paid listings company Overture (OVER) , formerly GoTo.com, but Semel made it clear this was a short-term deal for Yahoo!. "It is our intention to do this business ourselves," he said.
- Building off of the SBC deal to develop 10 million direct billing relationships in a "reasonable period of time," as Semel put it.
- Jettisoning certain unpromising operations such as Yahoo!'s Business to Business Marketplace and Yahoo! Living, an area devoted to house and home. (In his presentation to analysts, Mallett also included Yahoo! Small Business in this category of castoffs, but a Yahoo! spokeswoman subsequently said he misspoke; the operation is in fact a high priority for the company, she said.)
Delivering guidance to analysts for 2002 and beyond, Yahoo! Chief Financial Officer Sue Decker said the company expected revenue in the range of $725 million to $785 million, up 3.6% to 12% from the roughly $700 million in sales analysts expect the company to report for this year. Analysts surveyed by Thomson Financial/First Call have been forecasting 2002 revenue of $736 million, toward the low end of Yahoo!'s range.
The biggest revenue growth at the company, executives said, is likely to come from its listings business and from the access business inaugurated with SBC. Significant revenues in both areas, though, aren't expected until the second half of the year.