Latest Round Of Yahoo Layoffs The Most Severe

Yahoo will lay off 2,000 employees in an attempt to save money and restructure the company. Despite an enormous Web audience, Yahoo has struggled to build an identity as social media has taken off. It is currently embroiled in a big patent dispute with Facebook.

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It's ALL THINGS CONSIDERED from NPR News. I'm Robert Siegel.

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And I'm Audie Cornish. Yahoo was an early pioneer on the World Wide Web. Today, Yahoo announced plans to cut 2,000 employees, or about 14 percent of its workforce, but many people probably learned about this on Google or Facebook. And, as NPR's Steve Henn reports, that competition is one reason why Yahoo is struggling.

STEVE HENN, BYLINE: Yahoo has been through a succession of CEOs over the past five years. Its stock has stagnated while Facebook has exploded in popularity and Google's profits have soared. Yahoo makes most of its money from Internet advertising and, once, not too long ago, a lot of that cash came from search.

David Hallerman's an analyst at eMarketer.

DAVID HALLERMAN: Their search revenues have fallen off a cliff.

HENN: Yahoo still has more display ads than almost any other company online. It has an enormous audience, but Hallerman says...

HALLERMAN: It's not as valuable as it used to be, that the demographics skew older, lower household income.

HENN: And Hallerman says there's a perception among advertisers Yahoo's outdated.

HALLERMAN: And perception, of course, counts for a lot.

HENN: Yahoo's latest CEO is Scott Thompson. His top priority has to be to turn those perceptions around. Thompson's been in the job just over three months and has yet to lay out his vision of the company's future. Until today, his boldest move had been to sue Facebook for patent infringement.

JASON SCHULTZ: This is a trend we've seen among certain technology companies who are, as we say, on the decline.

HENN: Jason Schultz is an assistant professor of law at UC Berkeley. He says tech companies that are struggling commercially often resort to patent suits as a way to bring money in the door.

SCHULTZ: You have to be careful what you ask for.

HENN: Earlier this week, Facebook countersued, arguing that, actually, Yahoo is stealing Facebook's patented ideas.

SCHULTZ: Once you start entering into the patent wars, I think it can, in fact, overwhelm your company - even a company like Yahoo.

HENN: But many Yahoo investors like Scott Thompson's aggressiveness.

RYAN JACOB: So far, we're encouraged by what we've seen from the new management.

HENN: Ryan Jacob manages the Jacob Internet Fund and is a Yahoo shareholder. He called today's layoffs unfortunate, but necessary. Still, despite the company's recent moves and the departure of several longtime board members, Yahoo is facing an investor revolt. Its largest outside shareholder, a hedge fund called Third Point, is trying to force Yahoo to give it four new seats on the company's board of directors.

Jacob and many other outside shareholders believe the company has actually been mismanaged for years.

JACOB: I think the board itself has really run out of time.

HENN: In a letter to employees today, CEO Scott Thompson said the 2,000 layoffs would help the company become, quote, "a smaller, nimbler and more profitable Yahoo, better equipped to innovate as fast as customers and our industry require."

Steve Henn, NPR News, Silicon Valley.

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