Yahoo to lay off 15%, consider reverse spin

Yahoo to lay off 15%, meets earnings expectations
Yahoo to lay off 15%, meets earnings expectations

Yahoo on Tuesday announced it would consider a reverse spinoff and cut about 15 percent of its workforce as part of a restructuring to boost a sluggish core business.

The tech company also posted quarterly results broadly in line with analysts' expectations. Yahoo posted adjusted fourth-quarter earnings of 13 cents per share on $1.27 billion in revenue. However, its net loss came in at $4.44 billion due to a goodwill impairment.

Analysts expected it to report earnings of about 13 cents per share on $1.19 billion in revenue, according to a consensus estimate from Thomson Reuters. Yahoo shares fell more than 2 percent in after-hours trading.

An employee works at her desk inside the office at the Yahoo Inc. headquarters.
David Ramos | Bloomberg | Getty Images

Yahoo has weighed its next strategic moves amid a rough stretch for its Internet business and stock price. If it chooses a reverse spin, the company would effectively separate its core assets from its stake in Chinese e-commerce giant Alibaba.

In addition to the layoffs, which are expected to happen in the first quarter, Yahoo plans to close five offices. The company hopes to trim operating expenses by more than $400 million by the end of the year.

With the restructuring, Yahoo also aims to make its platforms more attractive to advertisers, improve sales and profitability, and boost its mobile business. The company will also consider divesting some nonstrategic assets, by which it said it could generate $1 billion or more in cash.

"We believe a simplified Yahoo will create greater shareholder value over the long term," said CEO Marissa Mayer in a conference call after the announcement.

Yahoo also took a goodwill impairment charge of $4.46 billion, saying that the carrying value of reporting units including the U.S and Canada, Europe, Latin America and Tumblr topped their estimated fair values.

Rumors have swirled about Yahoo's plans since it announced in December it would not complete the planned spinoff of its Alibaba stake amid concerns over whether it would be taxed. During its decision process, the company faced pressure from activist investor Starboard Value.

Yahoo shares have fallen about 35 percent in the last year.

During her tenure, the embattled Mayer has focused on growth in mobile, video, native advertising and social. For the fourth quarter, the collective "Mavens" businesses saw $472 million in sales, up from $375 million in the previous year.

Mayer said the company expects revenue in the segment to top $1.8 billion this year, up from $1.7 billion in 2015.

On the call, she stressed that Yahoo will focus on investing in mobile search and driving engagement on mobile platforms.

"We see mobile search as the biggest opportunity," Mayer said.

Gross mobile revenue for the fourth quarter climbed to $449 million from $413 million in the previous year. But gross search revenue fell 7 percent to $866 million. Paid clicks, a key advertising metric, dropped 10 percent.

Yahoo's sluggishness in advertising comes after Internet rivals Facebook and Google parent Alphabet topped fourth-quarter earnings expectations, largely on strong growth from their ad businesses.

The company separately said Charles Schwab would leave its board, adding that it was "not due to any disagreement with Yahoo" on operations.