No one’s favourite search engine, Yahoo! announced its third quarter results on Wednesday, along with official notice that they will be laying off 1,000 employees. The road ahead is definitely rocky for the once-darling of the Internet economy.
Yahoo! reported a net loss of $24.1 million or 4 cents per share for the third quarter. Although these figures are in sync with Wall Street estimates, they represent a sharp fall from the $8.1 million or 13 cents per share profit for the same period last year, which was also the time when Yahoo! had made big promises about their new advertising platform (code-named Panama). Needless to say, Panama did not live up to any of the hype and Yahoo! is now suffering the consequences.
This glaring downhill slide has forced those at the top to consider layoffs for about a thousand out of their estimated 14,300 employees in the immediate future. However according to CEO Jerry Yang, the company will continue investing heavily in some strategic departments like paid services, and advertising and search technology. Some of the laid off employees could reapply for jobs in the growth sectors.
Analysts at Wall Street expected advertising revenue to slide down, as it did. However, they did not expect the outlook to be as bleak as was painted by Yang. Revised projections for the fourth quarter place expected revenues at only $160 – 180 million against Wall streets estimated $190.8 million. Year end estimates have also been cut from $700 – 775 million to $688 – 708 million. Investors have taken these results negatively and Yahoo! share prices fell by over 10% in after-hours trading.
Egos at Yahoo! have taken a severe beating over the past few weeks, as they should. Their demise will be of their own making. During an interview with Fox Business News yesterday, Michael Arrington of TechCrunch said, “At some point Yahoo! might have to make a decision – to either lose the ad platform or partner with Google, or lose their company and get sold off to Microsoft or to a hedge fund in pieces.” This would surely be the most bitter pill for Yahoo! to swallow.