There have been rumors about the job cuts for weeks. While no specific reasons have been given, Yahoo management is likely to say that it has begun to consolidate its content business and make its technology operations more efficient. Some of the firings may also be based on the merger of Yahoo's search features with Microsoft's (MSFT) Bing search property. The joint venture will have about 25% of the U.S. search market, compared to Google's 67%.
Whether the layoffs will offer investors any long-term solace remains to be seen. Yahoo faces more challenges than the improvement of its technology facilities and the streamlining of its content business. Facebook now accounts for nearly a quarter of all display advertising sold in the U.S. The Facebook inventory is usually sold at a deep discount compared to Yahoo ads. Many industry experts believe that this low-priced inventory has put pressure on what Yahoo can charge for its ads, further undermining revenue. Layoffs can't solve that problem.