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Yahoo! Inc. (YHOO): Can Marissa Mayer Do The Extreme Cost Cutting Measure?

Yahoo! Inc. (NASDAQ:YHOO) has not done very well under the leadership of Marissa Mayer. Many analysts and experts feel that Yahoo! Inc. (NASDAQ:YHOO) is oversized. No CEO has had the courage to downsize the manpower in Yahoo! Inc. (NASDAQ:YHOO). But is Mayer cornered now and will she be pushed do the necessary manpower cut as many investors and analysts wanted? ‘The Street’ article compares Yahoo! Inc. (NASDAQ:YHOO)’s revenues and headcount and against Facebook Inc (NASDAQ:FB)’s headcount and revenues, which was quite interesting.

Alibaba Group Holdings Ltd (NYSE:BABA)

The article pointed out that over the past three years since Marissa Mayer took over as CEO of Yahoo! Inc. (NASDAQ:YHOO), the companies SG&A has increased by $500 million, whereas revenues dropped by 12% and EBITDA have dropped by a whopping 30%. Meanwhile, other companies like Facebook Inc (NASDAQ:FB) were adding up a lot of revenues through booming online advertisement business. Many feel that the only way to improve Yahoo! Inc. (NASDAQ:YHOO)’s position is to right-size the core business. How long can Mayer keep pushing back the request to right-size the core business?

Yahoo! Inc. (NASDAQ:YHOO) has a total of 12500 full time employees and in addition to that there are a total of 6000 variable term and fixed term contractors. With a total of 18500 employees, Yahoo! Inc. (NASDAQ:YHOO) is generating revenue of $4.6 billion in 2014, whereas Facebook Inc (NASDAQ:FB) has generated $12.5 billion revenues with 9000 employees. That just shows how oversized a company can get.

Out of $4.6 billion revenues in 2014, the company reported a operating profit of only $190 million, which indicates that the company has a huge operating cost, which needs immediate attention from the management.

Venture Capitalist Marc Andreessen pointed out in 2012 that Yahoo! Inc. (NASDAQ:YHOO) has 18000 employees on paper, which should be around 6000 – 8000. He was spot on with his numbers and many other analysts and investors have also pointed out the same thing. May be it is time that Mayer had to take Andreessen’s word and start cutting the operating cost to stack up revenues.

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