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January 7, 2016updated 31 Aug 2016 10:49am

Mayer loses battle over Yahoo job cuts

News: Investor pressure drives internet firm to slash workforce.

By Alexander Sword

Yahoo is cutting its workforce amidst growing pressure from shareholders to improve profitability.

The internet giant is planning to cut at least 10 percent of its over 10,000-strong workforce, with the media and platforms-technology groups, as well as its European operations, set to be targeted.

The 1,000 employees could leave Yahoo as early as January 2015, according to the report in Business Insider.

The announcement comes as pressure increasingly builds on Yahoo to pursue a new direction after over three years of CEO Marissa Mayer’s leadership did little to improve the fundamentals of the company.

Mayer has repeatedly been called on to cut the workforce, including by the Board of Directors itself and company executives, according to Nicholas Carlson’s book ‘Marissa Mayer and the Fight to Save Yahoo!’.

Mayer’s predecessor, Scott Thompson, had launched a workforce-cutting drive called Project Alpha, which aimed to cut the workforce by a third.

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Mayer abandoned the plans, arguing that lay-offs would be damaging to company morale.

Pressure for a change of direction has been ramped up in recent months. As Mayer took maternity leave, Yahoo investor SpringOwl Asset Management in December proposed a new plan to cut the company’s workforce by 75 percent and oust Mayer.

In January 2015 hedge fund investor Starboard Value launched a fresh attack on Yahoo with a letter to its board of directors, arguing that "significant changes" are needed to "executive leadership".

As pressure mounted, Yahoo hired management consulting firm McKinsey and Co. to oversee restructuring in November 2015.

Spending on employee perks such as free food and iPhones has come under particular criticism.

"At 1.5 meals a day per employee, Mayer’s perk has cost $450M over 4 years," SpringOwl’s document said.

The proposal also attacked spending on a Wizard of Oz photoshoot for $70,000 and a Great Gatsby-themed party costing $7 million, and cited 15 percent of Yahoo’s top performers leaving in the course of 2015 as an indictment of Mayer’s leadership.

Yahoo’s perceived failure to engage with the increasingly lucrative mobile market has also been cited as one of Mayer’s failures.

In the first half of 2015, Yahoo took only 20 percent of its revenue from mobile, compared to 88 percent of Twitter’s and 74 percent of Facebook’s.

Between H1 2013 and H1 2015, Twitter saw its mobile revenue rise from $165 million to $744 million, while Facebook saw its rise from $1.024 billion to $5.287 billion. Yahoo’s rose from being not material to $485 million in the same period.

Yahoo’s market capitalisation is currently $30.41 billion. It holds a significant stake in Chinese eCommerce giant Alibaba, worth $30 billion, and has recently announced plans to transferring its assets apart from the Alibaba stake to a new, publicly traded company.

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