Yahoo to lay off 1,000 workers in 'realignment'

ByJon Swartz, USA TODAY

SAN FRANCISCO -- Yahoo yhoo says it will lay off 1,000 employees, or 7% of its workforce, as it struggles to compete with Google and others amid a sputtering U.S. economy.

The cuts were announced after it reported a steep drop in quarterly profit Tuesday, which sent its stock tumbling.

Yahoo CFO Blake Jorgensen said the workforce "realignment," to take place in mid-February, should result in a cash charge of $20 million to $25 million during the company's current first quarter.

The Internet search company, which is in the midst of a management shake-up, earned $206 million, or 15 cents a share, during the quarter — down 23% from the same quarter a year ago.

Analysts, on average, had forecast earnings per share of 11 cents on revenue of $1.4 billion.

Revenue rose 8% to $1.8 billion. Excluding payments to advertising partners, revenue improved 14% to $1.4 billion.

The news drove Yahoo shares down 10% to $18.70 in after-hours trading; they had closed at $20.81 in regular trading.

"While we will continue to face headwinds this year, we believe that the moves we are making will help us exit 2008 stronger and more competitive and return to higher levels of operating cash flow growth in 2009," Yahoo CEO Jerry Yang said in a statement.

On Tuesday, Yahoo named Aristotle "Ari" Balogh, 43, chief technology officer. He was CTO at VeriSign, which manages domain name registries for websites.

Yahoo also renewed its subscription revenue deal with AT&T t, one of three major broadband providers with which Yahoo has joint ventures. AT&T and Yahoo said they had replaced a 2001 broadband access deal in which Yahoo takes a share of AT&T Internet subscriber fees with new efforts to deliver ads to Web users on their computers and phones.

Terms of the new multiyear deal, which involves revenue sharing, were not disclosed.

Some analysts, such as Jeffrey Lindsay of Sanford C. Bernstein, have advocated that the company chop as much as 25% of its workforce of 14,300 and outsource its search business to Google.