May 24, 1999 7:45 PM PDT
Deep GeoCities cuts to follow Yahoo merger
In addition, sources close to Yahoo said GeoCities founder and chairman David Bohnett will not take a position with the leading portal company. However, chief executive Tom Evans intends to oversee GeoCities' transition period.
Afterward, Evans's plans are up in the air, according to another source.
GeoCities and Yahoo declined comment on the layoffs and management decisions, citing a quiet period mandated by the Securities and Exchange Commission.
Yahoo's estimated $5 billion bid for GeoCities was the Web giant's move to acquire a strong brand with a highly devoted audience. The portal plans to weave e-commerce throughout GeoCities once it integrates the service into its site, and will direct market to GeoCities home page builders (or "homesteaders") and also allow them to set up their own virtual stores to sell products and services.
Last week a termination notice sent to GeoCities employees said the layoffs will be effective June 4, pending shareholder approval of its acquisition by Yahoo. GeoCities shareholders will vote on the deal Friday in Marina Del Rey, California. The deal is expected to pass, since about 60 percent of the firm's shares are owned by the board of directors, who are committed to vote in favor of the deal, sources said. The layoffs were first reported by MSNBC.
Most expect GeoCities will maintain its brand after the deal closes.
Sources said most layoffs will occur in redundant departments, such as human resources, finance, public relations, and sales and marketing. Most employees in its editorial and engineering departments are expected to stay.
The news may not be too bad for these employees. Terminated staff will receive a severance package of 3 months' pay plus a pro-rated pay-off of their annual bonus. This is on top of employee stock options, which, for those who joined after the company's initial public offering, will completely vest when the deal closes.
"I don't think people at GeoCities are hurting too badly," said Jennifer Klein, an equity analyst at Banc of America Securities.
Klein added that Yahoo hinted during its analyst day that it would consolidate many of the two companies' operations.
Analysts do not expect Yahoo's proposed merger with Broadcast.com to yield as many layoffs. Analysts said Yahoo will need Broadcast.com personnel to run a media streaming business, which is foreign to Yahoo's content aggregation focus.