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Yahoo Inc. will lay off nearly 700 workers after getting off to a bumpy start under a tough-talking new boss who has promised to engineer a long-awaited turnaround at one of the Internet's best-known franchises.
Neither the lackluster first-quarter results nor the job cuts announced Tuesday came as a surprise.
Analysts had already predicted Yahoo's three-year slump would worsen during the first three months of the year, and hints about the payroll purge were leaked to the media last week.
Investors drove up Yahoo's stock, extending a recent rally propelled largely by media reports that the company is getting closer to forging an Internet advertising partnership with Microsoft Corp. as the two rivals try to counter online search leader Google Inc.'s domination of the advertising market.
In a Tuesday conference call with analysts, Yahoo Chief Executive Carol Bartz declined to comment on the status of the Microsoft discussions.
This marks Yahoo's third round of mass layoffs in little over a year, but the first batch since the Sunnyvale-based company hired Bartz in January. The cuts will affect about 5 percent of Yahoo's 13,500 workers.
The estimated 675 people people losing their jobs will be notified during the next two weeks.
Yahoo dumped about 1,000 jobs in February 2008 and another 1,500 or so late last year while co-founder Jerry Yang was still running the company. Yang stepped down, largely because he wasn't able to snap the company out of its financial funk during his 18-month tenure as CEO.
Although it remains one of the most popular destinations on the Internet, Yahoo's fortunes have been declining since 2005 as Internet search leader Google Inc. sucked up more advertising revenue and trendy new online hangouts like Facebook and MySpace lured away younger Web surfers.
Yahoo earned US$118 ($NZ212) million, or 8 cents per share, during the first three months of the year. That represents a 78 percent drop from net income of $537 million, or 37 cents per share, in the year-ago period.
Last year's results included a non-cash gain of US$401 million. But Yahoo's profit this year still would have been lower even after subtracting last year's one-time boost.
The latest earnings matched the modest expectations among analysts surveyed by Thomson Reuters.
Revenue fell 13 percent to US$1.58 billion. If not for the stronger dollar, the sale of an e-commerce site in Europe and the loss of some fees, Yahoo said its revenue would have been down by just 3 percent.
After subtracting commissions paid to its ad partners, Yahoo's revenue stood at US$1.16 billion - about US$50 million below analyst estimates.
Management indicated that Yahoo's results will erode again the second quarter, with total revenue expected to range from US$1.42 billion and US$1.63 billion. Yahoo's revenue totaled US$1.8 billion in last year's second quarter.
Yahoo shares still surged 79 cents, or 5.5 percent, in Tuesday's extended trading after rising 72 cents to finish the regular session at US$14.38.
In remarks elaborating on the layoffs, Bartz indicated she is trying to focus Yahoo more on its strengths in online news, finance, sports, e-mail and Internet search, where it ranks a distant second to Google.
In the process, she thinks Yahoo can free up more money to expand those products around the world and possibly hire more workers in those areas.
Yahoo product managers, in particular, appear to be among the most likely to receive pink slips, based on Bartz's blunt comments.
"We sort of had one product management person for every three engineers, so we had a lot of people running around and telling people what to do, but nobody was doing anything," Bartz said.