Yahoo to lay off up to 700 staffers after profit drops

SAN FRANCISCO -- The reduction was part of a one-two gut punch of bad news. The Internet company blamed desultory financial results on a sluggish economy that made it harder to sell ads. Yahoo's first-quarter profit plunged 78%, to $118 million, or 8 cents a share, from $537 million, or 37 cents a share, in the same quarter a year ago. Its revenue fell 13%, to $1.6 billion.

The financial numbers were the first full quarterly results for tough-talking CEO Carol Bartz.

Most analysts expected the same middling results that have bedeviled the Internet pioneer since 2006. They estimated earnings of 8 cents a share on $1.2 billion in revenue, according to data from Thomson Reuters.

Yahoo shares jumped 5% in after-hours trading, to $15.11. It announced the layoff and quarterly results Tuesday after markets closed.

Bartz is "doing everything right. It's just that the economy and (tech) industry are sucky," says Karsten Weide, an analyst at market researcher IDC. "Yahoo's issues primarily are operational, and she needs to clean up shop. She started that (in late February) with a wide-ranging reorganization. The last round of layoffs didn't go far enough."

The latest cuts are Yahoo's third round in 14 months. Former Yahoo CEO Jerry Yang oversaw 1,000 job cuts in February 2008. Shortly before Bartz's hiring in January, more than 1,500 jobs were eliminated, leaving the company with about 13,600 workers worldwide.

Though year-over-year revenue rose 6%, and profit improved 8% to $1.4 billion, Google CEO Eric Schmidt said: "People are searching more but buying less."

Google decided to lay off about 340 workers and curb other expenses during the first quarter to bolster its profit through the tough times.

Investors hope Yahoo will forge an online advertising partnership with Microsoft to invigorate sales. The two companies, which discussed a merger and partnership last year, reportedly restarted discussions this month about a possible advertising agreement, according to The New York Times.