Yahoo! Inc. (NASDAQ:YHOO)’s plans to turnaround

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By David Scouts on October 21, 2014 Economy

Yahoo! Inc. (NASDAQ:YHOO)’s Chief Executive Officer and President Marissa Mayer will try to overcome the pressure that the company is facing from an activist investor Starboard, by outlining cost-cutting efforts. This was told by a person who was briefed on the plan. Starboard forced the company to reduce cost, explore a combination with AOL Inc. and split its core business from the Asian assets.

Wall Street Journal revealed that on Tuesday when Yahoo! Inc. (NASDAQ:YHOO) is declaring its 3^rd quarter results, it is expected that Marissa Mayer will then also announce how the company is planning to implement cost-cutting steps. The newspaper also revealed that Yahoo! Inc. (NASDAQ:YHOO) is planning to use the $5.8 billion that the company had made from the public offering of Alibaba Group Holding Ltd. to attain either one or more of the larger technology start-ups.

Activist investor Starboard Value LP openly pressured Yahoo! Inc. (NASDAQ:YHOO) last month to cut its bloated cost structure. Starboard is 2^nd activist investor that has pressurized Yahoo in the last three years. It also said that Yahoo should immediately fabricate its Asian assets, which are more than the value of its actual biz.

Yahoo! Inc. (NASDAQ:YHOO) has its headquarters in California but outside of California the internet company’s largest engineering facility is in Bangalore, India. Yahoo Inc. earlier this month announced that the company is reducing the size of its operations in Bangalore and is also shutting down its office in Jordan.

Yahoo! Inc. (NASDAQ:YHOO) is trying to systemize its operations in foreign offices. This systemization might result in closing down of offices, cutting jobs and transferring employees to its headquarters in Sunnyvale, California. Nearly 500 employees in India and Jordan are expected to be laid off by Mayer in an effort to cut costs.

A large acquisition can help Yahoo! Inc. (NASDAQ:YHOO) in generating new streams of revenue. In the past 4 out of the 5 quarters Yahoo sales have dropped and things don’t seem too positive for the future either. However, acquiring a growing company might help Yahoo! Inc. (NASDAQ:YHOO) to generate revenues and turn the company around.

Based on the Friday’s closing share price the investors value Yahoo at $38 billion, which is 10% down the 8 year high of $42.88.

Yahoo! Inc. (NASDAQ:YHOO) was popular amongst users once but the growing competition diverted its users to other similar websites and pages. Yahoo has gradually seen decline in its revenues and the challenge the company is facing because of an activist investor Starboard is creating more difficulties for the company. Yahoo! Inc. (NASDAQ:YHOO)’s new avatar was not received well by the users either. This could be another reason why Yahoo is losing popularity. Investors are more interested in sites like Google and Facebook. Marissa Mayer’s outline of the plan of cutting cost will be an effort to regain the confidence of the company’s shareholders and to assure them that the company will be able to turn things around in its favour. Whether Mayer’s plan will attract share holders to Yahoo! Inc. (NASDAQ:YHOO) or not is unclear as of now. However, Mayer’s address on Tuesday is highly anticipated by the market.