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Yahoo cutting 12 percent of work force

Posted at 5:27 p.m. PDT Wednesday, April 11, 2001

BY MARY ANNE OSTROM, Mercury News

Internet portal Yahoo, reeling from the slump in online advertising, reported a tiny first-quarter profit Wednesday and announced the first layoffs in its history.

In a statement, Yahoo said it planned to lay off 420 people, or 12 percent of its 3,510 person workforce. Yahoo is streamlining its business to focus on ``essential services,'' centralizing operations and cutting back on marketing, CEO and Chairman Tim Koogle said.

The company reported $180 million in revenues for the first quarter ending March 31, 2000, off 22 percent from the same period a year ago. The analyst consensus had been for revenues of $172.4 million.

Excluding one-time charges, the company earned $7.6 million, or a penny a share, on a pro forma basis. For the same period in 2000, earnings were 10 cents a share. In a pre-announcement last month, Yahoo, based in Santa Clara, warned investors that it would only break even for the quarter.

Shares of Yahoo fell 16 cents, or 1 percent, to $15.86 Wednesday on the Nasdaq Stock Market before the earnings announcement. In after-hours trading, Yahoo shares were up to $16.65. Yahoo also warned that it would 'approximately break-even' in the second quarter. Analysts surveyed by Thomson Financial/First Call had been expecting 1 cent per share.

Revenue is expected to decline slightly or stay flat from the first quarter, but the company expects to reduce advertising to 80 percent of revenue. Ads made up about 90 percent of Yahoo's sales last year.

Koogle said Yahoo had undertaken a ``comprehensive operational review'' during the first quarter before arriving at ``difficult decisions'' about the company's future. Yahoo began as a search engine in 1994, but has grown into a full-service information and shopping portal that had 57 million visitors in February, according to Jupiter Media Metrix. Only sites on the AOL-Time Warner and Microsoft networks were more popular.

But the company rapidly fell on hard times in recent months, with advertising revenue becoming hard to come by after the dot-com bust. The company has lost several top executives and is looking for a new CEO to replace Koogle, who said last month he would step aside, though remain as chairman, to broaden the company's management team. Yahoo's earnings release said the company was encouraged by the progress of the CEO search.

In another high-level departure, Yahoo announced Wednesday that Heather Killen, senior vice president of international operations, is leaving the company.

The Associated Press contributed to this report.

-- Swissrose (celier3@mindspring.com), April 11, 2001