Note to Yahoo: Layoffs aren't a turnaround strategy

Company absurdly suggests 'personnel changes' intended to position it for revenue growth

By  

Even as employees handed pink slips by Yahoo on Tuesday leaked out news of the mass layoffs via social networks, the company for much of the day refused to confirm to the outside world what everyone knew was happening.

Finally, late Tuesday afternoon (Eastern time), Yahoo released an official statement:

Today’s personnel changes are part of our ongoing strategy to best position Yahoo! for revenue growth and margin expansion and to support our strategy to deliver differentiated products to the marketplace. We’ll continue to hire on a global basis to support our key priorities.

Yahoo! is grateful for the important contributions made by the employees affected by this reduction. We are offering severance packages and outplacement services to these employees.

(Also see: Report: Yahoo to lay off 600-700 workers)

Someone will have to explain to me how laying off 4 percent of a company's workforce would position it for revenue growth. Indeed, the track record for Yahoo -- which has had three huge rounds of layoffs since February 2008 -- is just the opposite, as this three-year quarterly and annual revenue summary bears out.

The last time Yahoo showed double-digit annual revenue growth was 2006, when revenue rose an impressive 22 percent. Since then revenue growth has been:

* 8.5 percent in 2007
* 3.4 percent in 2008 (when 2,500 workers were laid off)
* -10.4 percent in 2009 (when 675 workers were laid off).

Yahoo is on track this year to just about match 2009's revenue. When's that layoff revenue-growth phenomenon going to kick in?

It's not. Layoffs are about cutting costs and improving margins. Important, undoubtedly, especially if a company is struggling to make a profit. But Yahoo has consistently turned in quarterly profits. That's not its problem; revenue growth is.

Shares of Yahoo (NASDAQ: YHOO) were down 7 cents, or 0.4 percent to 16.63 in Tuesday's regular trading. Usually Wall Street loves layoffs, but I think it's fair to say that investors still don't see the most important part of CEO Carol Bartz's turnaround strategy (whatever it is) anywhere in sight at the moment. And at the risk of sounding redundant, that would be revenue growth. No revenue growth, no turnaround. It's that simple. Investors aren't stupid.

Meanwhile, it appears that Bartz's confidence and steely determination hardly are helping to buttress spirits during this tough day.

Join us:
Facebook

Twitter

Pinterest

Tumblr

LinkedIn

Google+

Answers - Powered by ITworld

ITworld Answers helps you solve problems and share expertise. Ask a question or take a crack at answering the new questions below.

Join us:
Facebook

Twitter

Pinterest

Tumblr

LinkedIn

Google+

Ask a Question
randomness