In these troubling economic climes, it's not surprising to hear that many small to medium businesses are facing the possibility of liquidation, while large businesses increasingly have no choice but to downsize. Web pioneers Yahoo! are no exception; after a whopping 64 per cent slump in its third quarter profits, the search engine business has announced that it is to cut around 1500 jobs - approximately 10% of its workforce.Between 1 July and 30 September 2008, Yahoo!'s net profit amounted to just $54.3 million (£32.5 million), compared with $151.3 million during the same period last year. What's more, the company has lowered its 2008 revenue estimate to a range of $7.18 billion to $7.38 billion, a drop from the forecast of $7.35 billion to $7.85 billion made at the end of the second quarter.
Industry analysts, who have been predicting the demise of Yahoo! for some time now, have been quick to point out that this is the second time that the search engine has made significant job cuts this year. In January, 1000 employees were laid off - just weeks before it was offered $33 a share in Microsoft's failed buyout attempt.
With its stock price now at a five and a half year low at $12.07, Yahoo!'s CEO Jerry Yang could well be wishing he'd accepted the software giant's offer. However, he seems to be maintaining his confidence that the search engine can ride the global financial downturn. According to The Guardian, he said:
"We enter this slowing market with competitive advantages as the destination of choice for consumers and a leader in providing online advertisers with the broadest set of advertising management tools and products in the industry. We plan to continue building on those strengths."
Despite its current financial turmoil, Yahoo!'s crisis is probably nowhere near reaching the desperate climax of the likes of the Lehmann Brothers. However, it's a far cry from the successes its tech industry colleagues are reporting. Leading search engine Google's profits surged 31 per cent in the past quarter, while Apple has raised its own profits by 26 per cent.
Nevertheless, Yahoo!'s dramatic clean-out could be the key to its success once the global economy regains its strength. By ensuring that it remains both cost-effective and efficient during the bad times, it's putting itself in a strong position for economic success when boom years eventually return - if it can find the users to fuel it. Last week's announcement that Yahoo! is conducting its own ad campaign online and offline is certainly one way to tackle this, but a revamp of its core offerings and the injection of a new impetus for success in the company ethos is likely to be a much more effective solution.
