When is Your Pink Slip Coming? - December 10, 2008

What is the worst day of the week to lose your job? If you work for Yahoo Inc. (YHOO) that day could be Wednesdays. After what could be construed as one of the worst year’s in company history, today’s news just made it that much worse.

Company officials began early this morning by informing some 1,500 employees that their services were no longer needed. Today’s cuts amounts to 10% of the company’s 15,000 workers. Learn more about Yahoo’s layoffs at BoomTown.

The reduction in workers is aimed to cut annual costs by more than $400M. Other efforts, such as outsourcing, consolidating their office buildings and increasing their technology platforms are all part of the restructuring process.

The tumultuous times for the company began when Jerry Yang took over as CEO in June 2007. With a new head honcho, the company was poised to turn things around, especially when Google (GOOG) and Microsoft (MSFT) came calling.

Yahoo dismissed Microsoft’s proposal of acquiring the whole company for $47.5B just a few months ago. Google’s proposal was thwarted by anti-trust laws, which claimed that the joining of the two companies would create a near monopoly within the search engine and online advertising industry.

In a letter sent to Yahoo officials today, shortly after the job cut announcement, Ivory Investment Management LP, one of Yahoo largest investors, strongly urged the company’s board to get back to the negotiating table with Microsoft to see if they are still willing to purchase their search engines entity.

Ivory seems intent on looking out for the shareholders and not for Yahoo’s front office. Ivory holds more than 21M shares or 1.5% of the company and claims that Microsoft would be willing to buy the search platform for roughly $15B.

If the deal goes through, that would equate to an approximate value of $24 to $29 per share, more than double what the shares were trading at today, $13.22.

The deal appears to make sense. A representative from Ivory Management went on to state that “It is widely acknowledged that neither company has kept pace with Google's innovation and investment spending. As a result, both companies appear to have fallen further behind in a business area they have each repeatedly referred to as a top priority."

Whether or not Yahoo and Microsoft can come to some sort of an agreement remains to be seen. However, the most important factor today was the fifteen hundred people that were let go, and right before the holiday season. God bless and good luck in your future endeavors.

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