Yahoo Layoffs Have Begun, as Mayer Tries to Turn Around Her Turnaround

Yahoo layoffs began today, according to numerous sources, with conference rooms across all its facilities reserved to tell employees that they have been fired.

Sources said the cuts are deep and widespread, up to 15 percent of the staff of the Silicon Valley Internet giant that has not been able to gain ground under its latest CEO, Marissa Mayer. That’s more than 1,500 jobs, with cuts coming in places like media and sales. Yahoo’s search efforts have been largely spared the ax, said sources, since it is an area that Mayer thinks is poised for growth.

She has a plethora of outside advisers helping her make the layoff decisions, especially McKinsey & Co. Others — such as Goldman Sachs and Qatalyst Partners — are helping the company wade through a number of other thorny issues, including the separation of its stake in China’s Alibaba Group.

Mayer has been trying to turn around the company for several years and now is trying to turn around that turnaround. That would make it a circle, except it is a lot more complex than that — more like a snake that eats itself.

It’s all against a backdrop of investor unrest, including a looming proxy fight and what appears to be a split between Mayer and the board. In its earnings report last week, the directors indicated publicly that they are open to selling the very core Internet business that Mayer vowed to fix at the same time.

As I wrote then: Mayer is from Mars and the board is from Venus.

Sources — so many that I had to turn off my phone to stop the incoming calls from inside and outside the company — said Mayer is not making that sale process easy, including not leading due diligence efforts that will be important to any sale.

“She won’t return our call,” said one potential buyer, who is just the kind of buyer that actually could buy Yahoo. That is not a short list and includes Verizon, AT&T and any number of private equity players (TPG, Bain Capital) and media giants (News Corp).

Last week, Mayer said the sale talks were in the hands of the independent directors, a statement that is just not accurate. As anyone with only passing knowledge of acquisitions knows, the CEO of a company is critical to any such transaction to make it work, and cooperation from management is a must.

Is it confusing? You betcha! But not as perplexing as the layoffs have been for employees, including a number of botched firings as well as internal turmoil over just what was being cut. Mayer had made an “invest/maintain/kill” list for Yahoo to make the difficult choices.

All this will surely play into the hands of activist shareholder Jeff Smith of Starboard Value, who has been mulling an attack that should come within the next weeks if it is happening. He’s seeking board seats, obviously. And, if successful and in all likelihood given how these things tend to go, the departure of Mayer.