Business/Economy

SUNNYVALE (CBS) ― Slumping Internet pioneer Yahoo Inc. is expected to announce cost-cutting moves this week, including another round of layoffs, according to a report in The Wall Street Journal.
 
The exact number of layoffs is unknown, but job cuts are expected to come from all departments in the 14,300-employee company, according to the report.

Sunnyvale-based Yahoo, which is set to announce its third-quarter earnings Tuesday, has reportedly asked managers to identify areas where the company can achieve operating budget reductions of 15 percent.

Yahoo hasn't been immersed in this much strife and adversity since the dot-com bust walloped the company in 2001, triggering a traumatic shake up that eventually led to a turnaround.

Unlike its previous downturn, Yahoo hasn't lost money through its most recent troubles -- yet the company might be in a more precarious position now because its shareholders and employees seem to have lost faith in a management team led by co-founder Jerry Yang.

Since spurning a $47.5 billion takeover offer from Microsoft in May, Yang hasn't been able to convince Wall Street that he has a viable strategy to make the company worth more than Microsoft was willing to pay. And with an already feeble economy weakening even more, the prospects for a Yahoo comeback are looking dimmer.

Reflecting the bleak outlook, Yahoo's stock sank to a 5 1/2-year low of $11.37 last week. The shares entered this week at $12.90, far below Microsoft's last bid of $33.

Shareholders expressed their dismay with Yang and Yahoo Chairman Roy Bostock at the company's annual meeting in August. Nearly 40 percent of shareholders opposed Bostock's re-election while nearly 34 percent wanted to bounce Yang from the board.

Yang's job as chief executive is widely considered to be in jeopardy, particularly with shareholder activist Carl Icahn -- a strident critic during the Microsoft talks -- now on the company's board.

With revenue likely to erode, Yahoo is now mulling its second of layoffs this year. The company eliminated about 1,000 jobs in February, but then offset those cuts by hiring employees in other areas. Yang last month hired management consultants Bain & Co. to help Yahoo "get fit as an organization" and "work more efficiently."

Some of the most talented employees who survived the February layoffs have since left Yahoo to take other jobs out of frustration with the company's drift.

Yahoo had been counting on being able to show ads sold by Google to boost its annual revenue by $800 million. But the Google partnership, originally scheduled to launch earlier this month, is in limbo as the U.S. Justice Department investigates whether the alliance would diminish competition in the online ad market.

Besides trying to hitch its wagon to Google, Yahoo also has been negotiating with Time Warner Inc. about a possible purchase of AOL, another online icon that has fallen on hard times. Investors, though, have been worried that Yahoo is so desperate to find a financial catalyst that it will pay too much for AOL.

Analysts surveyed by Thomson Reuters expect Yahoo to report income of 9 cents per share on $1.37 billion in net revenue.

Both Benjamin Schachter of UBS and Sandeep Aggarwal of Collins Stewart are expecting Yahoo's earnings to fall a penny below analysts' estimates because of the "headwinds" facing the company.

But Yahoo's stock has been hammered so hard that Schachter thinks investors can still make money by buying the shares in their current range. If Yang doesn't straighten things out soon, Schachter believes a new management team will be brought to draw up a new strategy or Microsoft will renew its bid to buy the company at a much lower price than in May.

Yahoo is still hoping to find a way to persuade government regulators to green-light the Google partnership this month. And Microsoft Chief Executive Steve Ballmer last week raised the possibility of trying to negotiate another deal with Yahoo, although Microsoft tried to debunk the idea by issuing a public statement saying the Redmond, Wash.-based software maker has moved on.

Yahoo shares have shed 16 percent during the quarter and are down 45 percent for the year.

(© 2009 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)