Yahoo Gets Ready for the Knife

Over the past few years, Yahoo (NASDAQ:YHOO) has been restructuring its operations. Though the company hasn’t gone with the typical approach (job cuts), and instead has focused mostly on trying to find new avenues of growth. But for the most part, the company has failed.

So now it looks like Yahoo will resort to massive layoffs. According to an All Things Digital report, the company could be handing out thousands of pink slips. (Yahoo’s current headcount is 14,100.)

Yahoo’s new CEO, Scott Thompson, has hired the Boston Consulting Group to help with the process. Some of the targets include research, marketing and public relations.

No doubt, Yahoo is a bloated organization, and this has made it difficult to innovate. Instead, more nimble companies — like Facebook and even Google (NASDAQ:GOOG) — have been able to eat into its market share.

True, the tech industry isn’t exactly littered with examples of successful turnarounds. Just look at the failures at Palm and AOL (NYSE:AOL). Once a company stumbles, it is incredibly tough to play catch-up.

But there’s still some room for hope. IBM (NYSE:IBM) pulled off a successful recovery in the 1990s — and of course, so did Apple (NASDAQ:AAPL). These companies gutted the cost structure, which was extremely painful. But they also focused on just a few areas of strength.

The good news for Yahoo is that is has some great assets. Its brand remains strong across the world, and the company dominates news categories like finance, health and sports.

In fact, Yahoo could leverage these assets into the fast-growing market for mobile.  Consider that Thompson made this strategy as a success while he was at the helm of eBay’s (NASDAQ:EBAY) PayPal.

As for investors, there is no rush to get into the stock, which is trading flat today. But over the next few years, Yahoo does have some big opportunities — and it looks like Thompson is willing to make the tough choices.

Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli. As of this writing, he did not own a position in any of the aforementioned securities.

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