Layoffs, Cost Cuts Looming for Yahoo!

It's been a tough year for Yahoo!, but it looks like things are only going to get worse. With its stock price sliding down near $10, former Internet giant Yahoo! is set this week to announce massive layoffs and across-the-board cost cuts. And these moves come just months after Microsoft's mammoth $31-a-share bid for the company, which Yahoo!'s executives aggressively fought off.

Way to go, guys.

Yahoo! is expected to announce the cuts on Tuesday, when it reveals its most recent quarterly earnings. While its still unclear what those cuts will entail, two details have emerged from sources close to the company. Yahoo! will almost certainly cut more than 1000 workers, the number it previously laid off in January when the stock price sunk to the low $20s. And it has directed its internal business units to cut costs by 15 percent. Hiring, too, has almost ceased at the company, and Yahoo! has reportedly severed ties with dozens of external recruiters.

While Yahoo! will likely be quick to blame the worsening economic climate for its plight, this downturn comes while its chief competitor, Google, continues to grow share and revenues. Other trendy Internet properties, like Facebook and MySpace, continue to grow as well.

According to "the Wall Street Journal," Yahoo! is considering external deals in addition to internal structural changes. It has begun examining some kind of a combination with News Corp.'s AOL again, for example. Microsoft CEO Steve Ballmer last week briefly revived hopes that the software giant was still open to some kind of a deal, but other sources at the company were quick to point out that Microsoft and Yahoo! were not engaged in any discussions.

Also hovering over Yahoo! is a previously-announced search outsourcing deal with Google, which the US Department of Justice (DOJ) may seek to overthrow on antitrust grounds. Yahoo! and Google agreed to delay implementation of the deal after the agency threatened action. Both sides are still debating a possible settlement.

While Yahoo! would have been a financial and tactical drain on Microsoft, the Internet company should have jumped when Microsoft came calling in January. With the benefit of hindsight, it should be clear even to Yahoo!'s management that the future of the company is dim at best. But it was pretty obvious to everyone else months ago.

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