Yahoo Explains Why It Laid Off 2,000 Employees

The first round of those massive Yahoo layoffs hit this week, with 2,000 employees getting whacked. The company says the bloodletting will save it $375 million a year, allowing it to restructure in order to survive long enough to lay off more employees at a future time.

USA Today tracked down the email CEO Scott Thompson sent out to employees:

Yahoos –

Today we are restructuring Yahoo! to give ourselves the opportunity to compete and win in our core business. The changes we’re announcing today will put our customers first, allow us to move fast, and to get stuff done. The outcome of these changes will be a smaller, nimbler, more profitable Yahoo! better equipped to innovate as fast as our customers and our industry require.

Over the last 60 days, we’ve fundamentally re-thought every part of our business and we will continue to actively consider all options that allow Yahoo! to put maximum effort where we can succeed. As part of this process, I believe we have to focus to win in a select group of core businesses globally:

‚Ä¢ Core Media and Communications: Our content, media, and communications experiences must be best in class. That includes getting today’s core properties right and innovating on a next generation of great product experiences across all screens.

• Platforms: We must make our core platforms and systems a genuine strength for Yahoo! Рplatforms that we can really leverage to support our massive scale, drive the deepest personalization, and boost speed to market.

• Data: Our massive data sets must become a genuine competitive advantage for Yahoo!. We have to unlock the value in our data to allow us to really understand our 700 million users, encourage and win their engagement and trust, leverage everything they do with us to more fully personalize their experiences, and to give our advertisers the immediate insights they are rightfully demanding.

We are intensifying our efforts on our core businesses and redeploying resources to our most urgent priorities. Our goal is to get back to our core purpose – putting our users and advertisers first – and we are moving aggressively to achieve that goal.

Unfortunately, reaching that goal requires the tough decision to eliminate jobs, which means losing colleagues and parting with friends. Today, we will begin the process of informing employees about these changes. As part of that effort, approximately 2,000 people will be notified of job elimination or a phased transition. We value our people and for those who will be leaving, we thank you for all you have contributed to Yahoo!. We will treat all of our people with dignity and respect, providing resources to help manage through their transition.

Change is never easy. But the time has come to move Yahoo! forward aggressively with increased focus and accountability. Our values have always been about treating all Yahoos with dignity and respect, and today is a day to embrace those values. This is an amazing company with exceptionally talented people and I know we will all do our best to encourage each other through this difficult period of transition.

“Dignity” and “respect” are great, but they don’t pay the bills. Here’s hoping the soon-to-be-jobless land on their feet and find work at more stable companies as Yahoo continues to circle the drain.

Yahoo layoffs: Read the e-mail to employees [USA Today]


Edit Your Comment

  1. Fubish says: I don't know anything about it, but it seems to me... says:

    Translation: We are laying off 2,000 employees because our business is tanking.

    • PHRoG says:

      Whew…thanks for the summary. That’s a pretty long email to say all that needed to be said in one sentence. ;)

    • Djalli says:

      Every article that’s more than a couple of paragraphs should include a ‘TL;DR’ version – thanks Fubish!

  2. Gravitational Eddy says:

    There’s no way in hell 2000 emplyees are worth 375 million a year, Yahoo. Unless those are the top 5% people (the CEO, CIO, and the like)…. and I kinda doubt Yahoo would fire those people.
    So who does your accounting? The Feds? The local po-po after they seize your potted plants in the windowsill? The IRS?

    serious amount of bullshiat from the company spokesdroid here….

    • crazydavythe1st says:

      It gets closer than you think when you factor in employer share of payroll taxes, benefits, etc. They’re probably also shutting down certain projects associated with these employees and shedding associated capitol expenses, so you could hit $375 million fairly easily.

    • Nigerian prince looking for business partner says:

      $375 million sounds about right.

      $75,000 x 2.5 x 2,000 = $375,000,000

      I’m just guessing that the average salary for a California-based tech company is $75,000 and the overhead rate (2.5) is just a guess based on where I’ve worked in the past. I imagine it might even be higher for a company with a great deal of non-billable, R&D time.

    • unpolloloco says:

      An entry-level software engineer in SoCal can fetch nearly 100k, not including benefits and overhead. If anything, these numbers might be a bit low…

    • grumpygirl says:

      Benefits are expensive.

    • amuro98 says:

      You’re right. The number is too low.

      I was at a large well known tech firm in silicon valley and got laid off along with over 2000 others. The explanation was this would help save the company $2 billion in payroll over the next fiscal year.

      However, by my estimates they easily paid $2 billion paying for our salary, taxes, benefits, bonus, and severance package. If Yahoo is claiming to “only” save $375M, their severance package must totally suck.

      Companies always seem to fail to take into account the impact to all the projects who suddenly lost an engineer or two. My project was already behind and I learned later my departure utterly killed it because my group was already short-handed before. That was basically 6 months effort across a dozen other folks, all for naught.

      By law they a company is not allowed to rehire for a position that was affected by a lay off. Sure enough, 6 months later I notice that my former employer is now scrambling to hire…2000 new engineers, including my former position.

      Do you know how expensive recruiting is? Every hour a manager spends reading resumes or doing phone screening is an hour he can’t be in meetings or doing his normal tasks. Not to mention the time lost if he brings someone in to talk to his engineers….

      So…where’s this $2bln in savings again?

  3. consumeristjohn says:

    375 million divided by 2000 equals $187,500 per employee.

    • Captain Spock says:

      each employee + medical + any retirement contributions + electricity + equipment requisitions + closure of entire facilities…


      • Nigerian prince looking for business partner says:

        The numbers sound about right.

        Where I work, we generally multiply salary times 2.5 to determine our fully burdened, billable rates. Overhead is one of those things that really adds up quickly.

        • Nigerian prince looking for business partner says:

          …make that unburdened rates (I always get burdened vs. unburdened mixed up).

      • nopirates says:

        yeah. a manager-level employee or even an experienced developer could easily cost a company $187K, all-in.

    • Gravitational Eddy says:

      Ooooh, I gotta get me a Yahoo job. It pays better than I thought….

      • ajaxd says:

        An IT job pays 90K base salary on the low end. On average perhaps 110-125. That’s excluding bonus, stocks, etc… A qualified person should have no problem finding a new position either.

    • waitetr says:

      I suppose it’s possible to realize those kinds of savings after considering things in addition to salary such as:
      – PTO/Sick/Holiday
      – Retirement Match
      – Health Care
      – Cost of Real Estate (Office Space)
      – Work supplies (office and computer equipment)
      – HR and other services e.g. Payroll and Accounting
      – Utilities (Water, Electricity, etc.)
      – Taxes (e.g. Unemployment Insurance)

    • crazydavythe1st says:

      Don’t forget potential severance either. It can vary widely, but one to two weeks pay for every year of service isn’t uncommon in the tech industry.

  4. Fast Eddie Eats Bagels says:

    I hope their sports guy Chris Chase was included in the layoffs.

  5. valen says:

    As Seen on Twitter: “Today we are restructuring Yahoo! to give ourselves the opportunity to compete and win in our core business. […] As part of that effort, approximately 2,000 people will be notified of job elimination or a phased transition.” #winning

  6. Flik says:

    Good ol’ Scott Thompson — always one to refer to his employees by some dumb-ass nickname. “Yahoos”. He used to call us “PayPalians.” Hardy har, yuckity yuk, here’s your pink slip. Yep, good ol’ Scott.

  7. bobosgirl says:

    I call BS- my friend worked for them for over 6 years and got her pink slip yesterday. If they laid off 2,000 people with her salary, let’s just say it would NOT be 375 mil.

  8. AngryK9 says:

    And at the end of the year, you will be reading about Scotty’s $375 million bonus.

  9. tinmanx says:

    $5 says they fire all the people who do work. Off the Google and Facebook they go.

    Reminds me of a story about one of these turn around artists running the numbers and eliminates the department that cost the company the most money without knowing which department it was. Turns out that department is the sales department.

    • crazydavythe1st says:

      Random fun fact – a primary reason many companies still offer severance is because they can lock out someone from working for a direct competitor for some length of time.

      I wonder when we’ll start hearing complaints that former Yahoo employees are stuck watching grass grow because they can’t go work for Google or Facebook or the like.

      • rekoil says:

        That’s blatantly inaccurate. While there are noncompetes that may prevent someone from leaving one company to work for another, they’re not enforceable if the company terminates the employee. No company has the right to deny someone the right to work.

        In the cases where Company A has filed a suit against an employee to prevent them from leaving for company B, they’re still obligated to pay that employee’s salary while they’re telling them they can’t work for the competitor.

        • drjayphd says:

          Precisely. As someone that pays far too much attention to professional wrestling “news” (in quotes because it’s as much hearsay as anything else), these sorts of clauses come up all the time. WWE tends to have 90-day no-compete clauses in their contracts, which pretty much apply to any major competitors with TV deals. (Yes, TNA, that means you. And only you.)

          So in return for not getting to jump straight to the competition, they owe you your downside guarantee (what they’d pay you aside from house show and merchandise) for three months. You can refuse the guarantee, though, and the no-compete won’t apply. This happened to Kurt Angle, who jumped straight from WWE to TNA. The clauses also don’t apply if your contract runs out either.

          The perfect example of the latter is Jeff Jarrett, but he’s actually the reason they have these clauses. His contract ran out one day before a big pay-per-view in 1999, where he was scheduled to lose the Intercontinental Championship. He held up WWE for whatever money they owed him on merchandise, got the money (and stock options, as WWE had their IPO a couple days later) and pretty much napalmed any bridges between himself and Stamford. The next night, he popped up on WCW’s flagship show.

  10. Kuri says:

    Eh, I may have to transfer everything into my Gemail.

    • Draw2much says:

      I’ve been using Yahoo email for years, and with this latest news I went and got myself a Gmail account…. just in case. >_>

  11. budgetingincome says:

    I think the amount includes saving money on projects that these people are working on.

  12. Tacojelly says:

    …because they suck at what they do.

    btw, that means bing is equally awful since they use the same search engine.

  13. Jawaka says:

    Has any company even become better, quicker, or nimbler after laying off 2000 employees. If laying off all of these people makes then a more efficient company then why were they ever hired in the first place?

  14. Fumanchu says:

    What yahoo came up with that excuse!

  15. krom says:

    Dear, we need you now more than ever!

  16. Important Business Man (Formerly Will Print T-shirts For Food) says:

    375,000,000 / 2,000 = 1,875,00 each. I’ll sell my soul to Yahoo!

  17. Important Business Man (Formerly Will Print T-shirts For Food) says:

    187,500*** Maybe I should sell my soul to my math teacher instead….

  18. ironflange says:

    Maybe Microsoft is still interested.

  19. shufflemoomin says:

    “…win in our core business.” Which is..?