Yahoo to cut 15 percent jobs, close several units

In a letter to the company’s Board, Starboard Value expressed its frustration on Yahoo’s leadership because of core business “failed to deliver acceptable results” despite its efforts and billions of dollars spent on acquisitions over the past three years. The company expects the cuts to save $400 million a year.

In addition, a former Yahoo Inc. employee filed a lawsuit against the company yesterday, alleging that the firm used unlawful performance reviews to terminate workers without proper warning. Yahoo took a $42 million writedown on original programming on Yahoo Screen including Community and Sin City Saints, it disclosed in October, which made its shuttering inevitable.

Yahoo said it would consider “strategic alternatives” for its core Internet business and cut about 15 per cent of its workforce, even as it continues with its plan to revamp the business and spin it off.

Mayer fired back at many of Jackson’s claims during Tuesday’s conference call, characterizing the lavish spending allegations as “gross mischaracterizations and untruths spread about Yahoo”. Revenue for the same period declined 4% to $3.09 billion.

Analysts at EMarketer Inc predict that Yahoo’s USA market share could shrink to as much as 3.5% by 2017, from the 5.1% it held in 2015.

Yahoo is expected to announce its decision after releasing its financial results for the fourth quarter. The company scrapped a planned spin off of its stake in Alibaba late previous year following pressure from activist investors.

Yahoo chief executive Marissa Mayer said she is launching “a strong plan calling for bold shifts in products and in resources” to help revive the company’s fortunes. It (Other OTC: ITGL – news) aims to have 9,000 employees by the end of the year.

Yahoo’s expenses have risen while revenue has declined since Mayer took the reins three-and-a-half years ago. Sales Fourth quarter of 2014: $1.25 billion Fourth quarter of 2015: $1.27 billion, up 2% Yahoo’s overall sales have stagnated, but its fast-growing mobile, video, native advertising and social businesses represent a compelling success story.

Meanwhile, the New York Post reports that Starboard Value, another investor who has been on Yahoo’s case for a while and has threatened a proxy fight, isn’t keen on Yahoo’s reported plan, either, saying that “anything short of “we’re going to explore selling the core business” is not enough”.

Other disgruntled shareholders have voiced their frustration, including Canyon Capital Advisors, which said Yahoo needs to prioritize the sale of some assets, the Web operations or the entire business.

According to our consensus revenue estimates, Yahoo! is expected to bring in $949 million.