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Yahoo to axe 10% of workforce

Yahoo to axe 10% of workforce

Yahoo on Tuesday announced a cut of at least 10 per cent in its workforce by the end of the year as it reported a disappointing third quarter caused by weakening display advertising sales.

The Silicon Valley company reported its third consecutive quarter of falling revenues and lowered its forecast for the fourth quarter. The layoffs follow Ebay's announcement of a 1,500 reduction in its headcount this month and a wave of cuts by smaller web companies.

Yahoo reported revenues of $1.325bn, after subtracting payments to partners - below analyst expectations of $1.369bn averaged by Reuters Estimates. Earnings per share of 9 cents were a cent above expectations.

Jerry Yang, chief executive, said strong growth in Yahoo's search advertising business was not matched by display advertising. "Demand for branded display advertising slowed further in the US with weakness in categories such as finance and retail, where marketers are becoming increasingly cautious, as well as geographic weakness in branded advertising in Europe and Asia," he told analysts.

Mr Yang said this meant revenues came in at the low end of the outlook range and the uncertain future meant Yahoo was reducing its gross sales forecast for the full year. It predicted a range of $7.18bn-$7.38bn, down from $7.35bn.

He said the economic conditions meant Yahoo had to "accelerate" efficiencies. Its $3.9bn annualised costs would be cut by $400m by the end of the year, he added, with a cut of at least 10 per cent in Yahoo's workforce.

The company's headcount has grown by 1,400 during the past two quarters to 15,200, but cuts of more than 1,500 will take place over the next two months.

Mr Yang did not rule out further cuts, saying this was the first step of an effort to reduce costs that could include relocation of operations and the consolidation of Yahoo's real estate.

Yahoo shares had closed 6 per cent lower at $12.07 in New York and were 4 per cent higher in after-hours trading at $12.56. They are down 48 per cent so far this year and are far below the $33 a share offered by Microsoft before it withdrew its bid for the company in May.

Microsoft repeated last week that it was no longer interested in acquiring the company. Yahoo has struck a search advertising deal with Google, but Mr Yang said that talks were continuing with the Department of Justice about the deal and continued to delay its implementation.

Yahoo is also understood to be in talks with Time Warner about a possible merger with its AOL web business.

Yahoo said on Tuesday it was conserving cash for possible acquisitions. It reported cash and investments worth $3.3bn at September 30, an increase of $80m over the previous quarter.

By Chris Nuttall

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