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Yahoo’s CEO Unveils His Strategy

Scott Thompson's reorganization creates three primary divisions


Yahoo‘s (NASDAQ:YHOO) new CEO, Scott Thompson, is reorganizing the struggling Internet pioneer to concentrate on building customer and advertiser relationships.

The company has faltered in recent years as competitors like Google (NASDAQ:GOOG) and Facebook have surpassed it, leaving it with declining revenues and brand strength, Reuters said. Last week, Yahoo announced plans to trim its workforce by 14% — 2,000 people  — as part of the restructuring.

A former PayPal executive at eBay (NASDAQ:EBAY) who joined Yahoo in January, Thompson issued a memo today laying out his vision for a reorganized, refocused Yahoo. Workers received additional commentary during a company meeting held this afternoon, Reuters said.

“To be very clear, our highest priority is winning in our core business, and that will earn us the right to pursue new growth opportunities,” Thompson wrote in the memo.

The company will now be restructured into three divisions:

  • Consumer: comprising its search engine, news websites, email, Flickr and e-commerce operations.
  • Regions: responsible for working with advertisers in different markets around the world.
  • Technology: maintaining and developing the company’s technical infrastructure and Web platforms.

Thompson said the reoganization was meant to “bring some of our best product designers and engineers much, much closer to consumer needs and demands.” The new organization officially takes effect on May 1. Yahoo, which posted 2011 revenue of $4.98 billion, will release its first-quarter results next week, Reuters noted.

Thompson said the company would appoint a new, yet-unnamed executive to boost advertising sales from its current e-commerce operations. The New York Times cited sources inside Yahoo who identified the new advertising head as Sam Shraugher, a former subordinate of Thompson at PayPal. The Times noted that Shraugher resigned from PayPal last week.

Analysts cited by Reuters said Yahoo was still looking for direction.

“Right now they’re just trying to put all the pieces in place and trying to figure out some kind of coordinated way to move forward. It’s pretty obvious the new leadership thinks they need to be leaner,” Michael Yoshikami, fund manager at Destination Wealth Management, told Reuters. “All the reorg is really secondary to really figuring out what Yahoo wants to be.”

Left out of the new organization is the products group, formerly run by Blake Irving, who is set to leave the company.

“It’s time for Yahoo to move forward, and fast,” Thompson said in the memo. Investors couldn’t agree more.

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