October 31, 2003 12:32 PM PST

Yahoo shutters enterprise software division

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Yahoo is shuttering its enterprise software division and has laid off an undisclosed number of employees as a result.

The division, which Yahoo formed to sell versions of its Web software to large corporations, will meld its operations into Yahoo's consumer counterparts. Yahoo will continue to sell products formerly under the division's oversight, but different management will run these sales efforts. That means that products such as Yahoo's corporate instant-messaging service will fall under the control of managers who run the free consumer service.

"Enterprise solutions as a division is being parceled out to be with complimentary elements on the consumer side," Yahoo spokesman Chris Homan said.

As part of the move, Yahoo laid off an undisclosed number of employees from the enterprise solutions division last week. While Yahoo's Homan would not specify how many employees were laid off, he said the move affected people in Yahoo's Sunnyvale, Calif., headquarters and others in Dallas and Atlanta.

Besides corporate IM, Yahoo also sells Net broadcasting services and Web portal software.

Steve Boom, the senior vice president of the enterprise solutions division, will continue managing the corporate IM product, but he will report to different management, although Homan declined to offer further details.

The dissolution of the enterprise solutions divisions culminates after years of financial uncertainty. In December 2002, the division underwent layoffs to reduce costs that are associated with its Web broadcast business. The streamlining held significance, because the businesses resulted from Yahoo's $5 billion acquisition of Broadcast.com in 1999.

For many financial quarters, Yahoo offered glimpses of the enterprise division's woes. In April, Yahoo said the division lost between $6 million and $7 million in revenue, largely from de-emphasizing its broadcast business. Yahoo mentioned further revenue declines in its July earnings report.

Analysts said Yahoo's de-emphasis also underscores the difficulty that media-oriented companies have when selling directly to corporations. AOL recently backpedaled from its plans to sell its AOL Instant Messenger for enterprise users and has instead focused on partnering with established players such as Reuters.

"I've been skeptical of Yahoo's ability to penetrate the enterprise market almost since inception," said Derek Brown, an analyst at Pacific Growth Equities. "I see enough business-focused software companies having a difficult go at things. For Yahoo to crack that code would be very challenging."

However, the company positioned the change as a way to streamline its overall IM efforts, both on the consumer and on the enterprise sides of the business.


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