Goldman Sachs upgraded Yahoo stock today, calling it a “conviction buy.”The main reason is that Yahoo is spending more than $2 billion to buy its own stock, raising the price.
But Goldman is also suddenly “less pessimistic” about Yahoo’s core business.
There are two reasons for this.
- Goldman believes Yahoo is improving revenue per search.
- Goldman believes Yahoo is about to go through “cost reductions”
“Cost reductions” is polite language for “layoffs” or “firings.”
Thanks to these cost reductions, Goldman believes Yahoo’s margins will improve by more than $150 million in 2013 – even after “tech and investment spending.”
Like Goldman, we’ve also heard from reliable sources that Mayer plans to reduce costs.
Unlike her predecessors, she is not likely to cut costs in a single massive layoff. Instead, we’re told to expect her to cut costs “very surgically, very carefully.”
She should be careful. Sniper-style layoffs can be very bad for morale. Sometimes its better to get the pain over with.
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