BERKELEY, California (Reuters) - Yahoo Inc. YHOO.O needs a dramatic organizational shake-up and cuts in its work force of up to 20 percent, according to an internal memo written last month by Senior Vice President Brad Garlinghouse.
Garlinghouse, a second-tier Yahoo executive who has taken increasing powerful roles in the company since joining 3 1/2 years ago, argues that Yahoo suffers from a lack of consistent leadership, business focus and a “single cohesive strategy.”
“We lack a focused, cohesive vision for our company,” Garlinghouse writes. “We want to do everything and be everything — to everyone.”
The document was published in the Saturday edition of the Wall Street Journal. A Yahoo spokesman confirmed the authenticity of the memo, but declined to comment directly on details contained in the memo or in the newspaper story.
The Journal story also describes rumors that Chief Operating Officer Dan Rosensweig and Chief Financial Officer Sue Decker could be elevated to become co-presidents, in preparation for the retirement of Chairman and Chief Executive Terry Semel, age 64, who joined Yahoo five years ago.
The call for restructuring follows a series of embarrassments that have caused Yahoo shares to lose 31.5 percent of their value so far this year. It is struggling with a slowdown in parts of its advertising business while racing to keep pace with far-faster growing rival Google Inc. (GOOG.O).
The memo — known as “The Peanut Butter Manifesto” because it argues that Yahoo’s investment strategy is like spreading peanut butter too thinly on bread — argues for a “radical reorganization” of the 12-year-old Internet media giant.
“I hate peanut butter,” Garlinghouse writes.
The Yahoo executive said the company should cut its work force by 15 percent to 20 percent as part of a plan to reshape the current business unit structure and eliminate the bureaucratic duplication of functions that exist across Yahoo.
The Sunnyvale, California-based company has nearly 10,000 employees worldwide.
“There are so many people in charge (or believe that they are in charge) that it’s not clear if anyone is in charge.”
“I believe we must embrace our problems and challenges and that we must take decisive action,” the memo states bluntly.
Garlinghouse names a variety of duplicative groups that pit established business units against new initiatives, including music, photos, search, applications, social networks, global strategy and even who controls the Yahoo home page.
In a statement, Yahoo’s leadership has defined three areas of focus for its business.
During its quarterly financial conference call last month, Semel described efforts to close the gap with rival Google Inc. (GOOG.O) in how much revenue it generates from its search business, increase its lead in brand advertising and get a jump on emerging markets like video, mobile and social networks.
“The memo itself highlights that we have an open, collaborative culture and a senior management team that is intensely committed to helping Yahoo! fulfill its potential as an Internet leader,” the Yahoo statement said.
The Journal said the memo has received support from Yahoo senior management and that Garlinghouse had been asked to head an internal committee to investigate the issues he raises.
“All is not well,” Garlinghouse writes. The memo itself was written in response to an October 11 New York Times article that he describes as “a painful public flogging.”
“While it lacked accurate details, its conclusions rang true, and thus was a much needed wake up call,” the Yahoo executive writes. “It’s time for us to get back up.”