Yahoo! Inc. (NASDAQ:YHOO) completes full exit from China

Yahoo! Inc. (NASDAQ:YHOO) completes full exit from China

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Yahoo! Inc. (NASDAQ:YHOO) is shutting down its office in China as CEO Marissa Mayer is under pressure from shareholders to take necessary steps to cut costs while the Internet Company struggles to bring in more revenue.

It has been disclosed that the role played by the Beijing operation’s will now be shifted to other Yahoo Inc. offices. Yahoo provided no details about how many people will be affected in China, but promised that all the workers will be treated “with respect and fairness.” The company reportedly has employed 200 to 300 people there.

“We are constantly making changes to align resources, and to foster better collaboration and innovation across our business,” Yahoo said in the statement. “We currently do not offer local product experiences in Beijing but the office has served as a research and development center.”

The closure leaves nothing for Yahoo in China, where the Sunnyvale, California, company was engaged in the winding-down process since Alibaba Group took over the operation of China Yahoo! in 2005.

“An R&D facility like this is a huge cost, and for a company as weak as Yahoo is now, it doesn’t make sense,” said Shaun Rein, managing director of China Market Research in Shanghai. “Yahoo doesn’t have significance in China. Yahoo can’t really recruit top people and Chinese firms are not going to advertise on Yahoo.”

That $1 billion deal gave Yahoo a highly profitable ownership in Alibaba that is now valued at about $33 billion. Yahoo is preparing to create a tax-free spinoff with its remaining Alibaba holdings later this year, getting rid of an asset that kept its focus away from the challenges facing Yahoo’s own businesses.

Mayer was hired by Yahoo in July 2012 to get the company out of tough situation, but so far she failed to increase the company’s sales even though advertisers have been spending more on the Internet and mobile devices. Yahoo’s revenue saw a drop of 1 percent to $4.6 billion last year.

Shareholders believe Mayer must keep expenses lower as part of a move to engineer a turnaround. New York hedge fund Starboard Value, a key stakeholder in Yahoo! Inc, has been pressing the company for the same. Earlier this month, the activist investor released a public letter in which its CEO Jeffrey Smith urged Mayer to cut costs by about $450 million annually. Smith is also in the list of those Yahoo shareholders who called upon Mayer to divest its minority stakes in the Alibaba to avoid triggering a huge tax bill from sale of the stake.

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Brayden Fortin is a American with numerous years of investment experience in the American Equity Market and in the Global Commodity Market. He has a B.Com degree from a well respected Canadian university and has experience working in the wealth management industry. He is interested in delving into numbers to analyze companies and markets. He won a couple of international strategy simulation competitions involving decision making through numerical analysis, and also scored in the top 50 on the Bloomberg Aptitude Test (out of nearly 200,000 test takers).

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