Yahoo is reducing its workforce 4 per cent as it hands out 600 layoff notices for the holidays.
The job cuts announced yesterday follow weeks of speculation about whether a long-running financial funk would spur Yahoo to trim its payroll before the new year.
This marks the fourth time in three years
that Yahoo has resorted to mass firings to boost its earnings.
The company is under pressure to cut costs because its revenue has risen by less than 2 per cent so far this year and CEO Carol Bartz has promised to increase Yahoo's operating profit margin to as much as 24 per cent by 2013. The margin stood at about 12 per cent through the first nine months of this year.
Although Yahoo needed to tighten its belt to widen its profit margin, the timing of the layoffs was horrible, said Gleacher & Co analyst Yun Kim.
"I don't think this is going to score them any PR points."
Yahoo's struggles have raised questions about whether Bartz, CEO for the past two years, might lose her job before her contract expires in January 2013. The doubts have been heightened by defections among Yahoo's top executives and her lack of experience in online advertising.
Yahoo's problems stem mostly from its inability to keep pace with Facebook, Twitter and other younger, more innovative rivals.
Although Yahoo's website still attracts more than 600 million visitors, many of those are staying for shorter periods as they increasingly hang out on Facebook and Twitter.
That competition compounded the challenges already facing Yahoo after getting trounced by Google in the internet's lucrative search market. Although the pendulum shifted several years ago, Yahoo was once far larger than Google and even toyed with the idea of buying its then-smaller rival, as it once did with Facebook.
