Jan. 22 (Bloomberg) — Yahoo! Inc., owner of the most- visited U.S. Web site, will cut about 700 jobs, or 5 percent of its workforce, as it reorganizes to compete with Google Inc., according to a person with knowledge of the plans.

The reductions to its workforce of about 14,000 may be announced around the same time as it reports earnings on Jan. 29, said the person, who declined to be identified because the cuts haven’t been disclosed. Yahoo spokeswoman May Petry declined to comment. In a statement yesterday, the company said it will “eliminate some areas of the business.”

Yahoo has reported seven straight quarters of declining profit as it lost Internet-search users to Google and faced competition from new rivals such as Facebook Inc. and News Corp.’s MySpace. Yahoo Chief Executive Officer Jerry Yang began a reorganization after taking over from Terry Semel in June.

“The headcount went up without a clear sense of what the company was,” said Mike McGuire, an analyst with Gartner Inc. in San Jose, California. “A lot of Wall Street was taking Yang at his word when he said they were going to look at everything.”

Henry Blodget, a former Merrill Lynch & Co. analyst, said on his Silicon Alley Insider blog on Jan. 19 that Yahoo may cut 1,500 to 2,500 jobs.

Yahoo dropped as much as $5.02, or 24 percent, to the equivalent of $15.76 in German trading from the close of $20.78 on Jan. 18 in Nasdaq Stock Market trading. The stock traded at $17.05 as of 10:25 a.m. in Frankfurt. Before today, the stock had lost 11 percent this year in the U.S.

100-Day Plan

“Yahoo plans to invest in some areas, reduce emphasis in others, and eliminate some areas of the business that don’t support the company’s priorities,” according to the statement from the Sunnyvale, California-based company.

In July, Yang told investors he would spend the next 100 days reviewing the company’s business units and crafting a plan to “dramatically improve” performance.

Yahoo’s sales rose 12 percent to $1.77 billion in the third quarter, compared with a 19 percent gain a year earlier. Sales at Mountain View, California-based Google gained 57 percent to $4.23 billion.

While Yahoo draws more visitors than Google in the U.S., Google leads in the market for selling ads next to Internet search results. In November, Google accounted for 59 percent of search queries, compared with Yahoo’s 22 percent, according to ComScore Inc. in Reston, Virginia.

Peanut Butter

To close the gap with Google, Yahoo upgraded its search engine last year to include videos and Flickr photos in query results. This month, the company introduced an upgraded home page for mobile phones and said it will offer software to help outside developers build applications for handsets.

In an internal memo leaked to the Wall Street Journal more than a year ago, Yahoo executive Brad Garlinghouse recommended cutting staff by as much as 20 percent. The memo, called the “The Peanut Butter Manifesto,” said too many employees had overlapping responsibilities.

“This is a company that a lot of people believe has some pretty significant issues to tackle,” said Scott Kessler, an equity analyst at Standard & Poor’s in New York, who recommends holding onto Yahoo shares. “The company, for all it’s been able to do over the last decade, has fallen behind in some major areas.”

Source: http://www.bloomberg.com/apps/news?pid=20601087&sid=agZ4ws72e5Y0&refer=home

Tags: jobs, yahoo

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