When the Google search deal evaporated, it took $250-$450 million of Yahoo annual operating cash flow with it. Yahoo has to get that back. Yahoo also needs to recognise that its plan to cut 1500 jobs will merely roll the company’s payroll back to its level at the end of Q2. This is not nearly enough.
We don’t know where all these employees are and what they’re doing (We work for the company, and most of what we see is really lean). Based on the company’s P&L, however, most of them are probably in sales and marketing, and that’s where the biggest cuts need to be.
Our Yahoo Fat Farm analysis suggested that Yahoo needs to reduce its staff by 3000, and we have seen nothing that makes us think differently. The economy has nosedived in the month since we published the analysis, so, if anything, the cuts should probably be deeper. Now that Google has left Yahoo weeping at the altar, this is even more true.
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