There's just one day left before Yahoo posts fourth-quarter earnings on Tuesday, and by the looks of it, the company won't have much good news to share. In the wake of sluggish growth and a management shuffle, the company is widely expected to announce lay offs in an effort to cut costs.
"I expect [the company] to announce close to 1,000 layoffs. I can't tell you where [Yahoo] will cut from, but I can tell you what they're not going to touch: Mail, Instant Messenger, Yahoo Finance, Flickr and Del.icio.us," says Global Equities Research analyst Trip Chowdhry. "I think Yahoo, like eBay, is fatigued. They've got to get rid of the things that aren't working anymore. They're on a long journey, it could be another two to three years of turnaround."
That may not be Yahoo's only piece of bad news. The company is also expected to provide an update on its deal with AT&T, which is supposed to be renegotiated this spring. Under the current agreement, Yahoo receives fees per subscriber for providing premium web-based services to AT&T's broadband subscriber base. It's not clear how the talks are going, but Youssef Squali, an analyst with Jefferies & Co., thinks the company could lose $200 million to $250 million in access fees under a new agreement.
"We've heard that Yahoo gets $2 per month per subscriber in fees, but there's no way the agreement will get renewed on a fee basis," says Jim Friedland, Cowen & Co. analyst. "[The AT&T renegotiation] is going to be bad for Yahoo, it's just a question of how bad will it be. We think the fact that the company is clearly planning layoffs is a sign that things haven't turned around yet. The road ahead is a difficult one."
