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The BBC's Mark Gregory
"Shares have plunged by more than 90%"
 real 28k

Thursday, 12 April, 2001, 06:23 GMT 07:23 UK
Yahoo losses prompt job cuts
Yahoo logo
The American internet company Yahoo is to cut 12% of its workforce following losses caused by the slowdown of the US economy.

The firm recorded net losses of $11.5m in the first quarter of 2001, after a sharp downturn in advertising revenue.

About 400 jobs will go to save costs.

Yahoo warned last month that its first quarter results would fall short of expectations.


We remain steadily focused on developing and delivering the essential services that will result in Yahoo becoming the internet's leading global consumer and business services company

Tim Koogle,
Chief executive
The losses compare with profits of $67.6m in the first quarter of last year.

After the announcement, Yahoo's shares rose to $16.25 in after-hours trading, from $15.86 at the close of the regular trading session on Nasdaq.

Chief executive Tim Koogle said in a statement that during the second quarter, the business would be streamlined to "become more efficient", and its costs would be aligned with the "current market environment".

"We remain steadily focused on developing and delivering the essential services that will result in Yahoo becoming the Internet's leading global consumer and business services company," he said.

Excluding special items, Yahoo said it had earned $7.6m compared with a profit of $60.5m in the same quarter last year, slightly beating analysts' expectations.

Drop in customers

Yahoo said its revenues fell to $180.2m from $230.8m a year earlier, also slightly ahead of analysts' expectations.

But it revised its previous predictions for the second quarter, saying it expected to make less than expected.

Yahoo relies heavily on advertising revenue from dot.com companies which has dried up in recent months.

The number of customers on its books fell by 15% over the quarter to 3,145, according to sources.

But customers, which tended to be increasingly from more established businesses, were signing longer contracts, the company said.

Twice in the past few months Yahoo has warned that there would be no profits for the first quarter.

Hopeful

Investors' nerves are likely to be rattled by ongoing uncertainty about the future direction of the company.

The company, which was once the darling of the high-tech sector, is still seeking a chief executive to replace Mr Koogle.

He announced his resignation earlier this year, but will remain chairman of the board.

However, with so much bad news already out in the open, investors will be hopeful that the value of their shares has little further to fall when markets open on Thursday.

In recent weeks, Yahoo has announced new initiatives that are designed to offset the decline in advertising revenues and move the company toward a more profitable business model that will include selling music.

Last Thursday, Yahoo said it had joined an alliance between Vivendi Universal and Sony, which is intended to rival Napster's online music sharing service.

The music of Vivendi Universal and Sony Music will be available - for a fee - through the Yahoo website.

News of the deal sent Yahoo's share price 20% higher.

Pornography

Yahoo has also surprised some observers by reportedly entering the pornography market, one of the few internet sectors to consistently make money.

The Los Angeles Times said the company has opened an online store stocked with adult videos and DVDs.

Uncertainty surrounding prospects for the US economy and the technology sector leaves many investors nervous about Yahoo's prospects.

Some analysts say internet advertising revenue will drop about 20% this year - a blow Yahoo can ill-afford, having already slipped behind AOL and Microsoft's MSN in the internet portal pecking order.

They say the future for Yahoo is to start charging users for services, as AOL and MSN already do.

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See also:

11 Apr 01 | Business
Yahoo's next move
05 Apr 01 | Business
Yahoo joins online music venture
19 Mar 01 | Business
MSN builds UK lead over Yahoo
08 Mar 01 | Business
Yahoo warns earnings will slip
16 Feb 01 | Business
Yahoo bosses quit
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