Do Web Layoffs Work? (YHOO, GOOG, AOL, MSFT)

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Investors usually reward companies for announcing layoffs.  Getting more from fewer workers adds to margins and hopefully to net income.  The more serious question is what a new round of layoffs means at digital companies.  If a company has hundreds or thousands of workers who need to be fired at digital companies, it probably reflects poorly on the company itself. After all, the economy is still in recovery mode even if the advertising market is not quite as linear as many would have hoped.

Yahoo! Inc. (NASDAQ: YHOO) is rumored to be announcing a restructuring which would make thousands of layoffs coming down the pipe.  AllthingsD.com noted that the layoffs are targeted at the products division.Does this make sense?

There are many web properties out there.  Everyone has always maintained that content is king, but monetizing content is not always as easy as it sounds.  Ultimately it boils down to what advertisements or up-sell opportunities exist.

There is already a Google Inc. (NASDAQ: GOOG) with a search model for everything.  Google is also diversifying into many areas where it owns content or technology, but Google was the number one killer of Yahoo! over the last decade.  There is already an AOL Inc. (NYSE: AOL) in online content (and dial-ups) and there is already a Microsoft Corporation (NASDAQ: MSFT) in software and in content.

What Yahoo! will ultimately be remains an unknown.  Thousands of layoffs just doesn’t sound like the core Yahoo! model has much of a future.  Many internet addicts have argued that for years now, but Yahoo! still generates $1 billion in quarterly revenues.  This is a situation that to lay off thousands more in workers does not offer much hope on the prospects of the company when you consider that Carol Bartz already conducted layoffs.

JON C. OGG

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