Digital Crosstalk

Yahoo cuts 1500 jobs as it announces fall in profits

Posted by Brian | Filed under blogging

The recession couldn’t have come at a worse time for Yahoo. As the search engine’s profits continue to fall, and its user base disintegrates, Yahoo cannot afford companies cutting back their advertising budgets. Whilst Google is confident it will not suffer dramatically from the recession, Yahoo has launched a lifeboat strategy, laying off thousands of staff, in an attempt to build a safety float to ride out the storm.

Yesterday Yahoo announced that it would make 1500 of its staff redundant, as it announced a 64% fall in profits during the third quarter. The company hopes this latest move will save around $400 million, however half of this could be sucked up in the $200 million possible loss the company is tightening its belt for.

Although this latest news does not give Yahoo any publicity favours, Wall Street reacted positively to the move and shares rose 8%, temporarily distracting investors from the predicted annual losses.

Yahoo is the latest in a list of casualties to report redundancies this week. Recently Hi5, one of the largest social networks announced that it would cut 10-15% of its staff. Despite nearly doubling its user base during the past year, and growing to be the third largest social network, the website’s cash flow has undoubtedly been struck by the crippling effects of the recession.

Yahoo’s latest move, whilst welcomed by investors, does not have the long-term qualities to compete in the search engine wars. The extra cash may temporarily weather the storm, but it’s innovation which always dictates which of the search engines will finish first.

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Tags: digital