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Originally published April 10, 2012 at 5:13 PM | Page modified April 10, 2012 at 10:04 PM

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Yahoo CEO reveals reorganization plan

Scott Thompson is under pressure to return the Sunnyvale, Calif., company to growth after a period in which revenue and profit have steadily declined.

San Jose Mercury News

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SAN JOSE, Calif. — Yahoo CEO Scott Thompson unveiled a much-anticipated reorganization plan Tuesday, in a memo that said the struggling Internet pioneer will focus its efforts in three main divisions that he hopes will build closer ties with consumers and advertisers.

Thompson planned to discuss the changes during an "all-hands" meeting with employees Tuesday, a week after he announced plans to cut 2,000 jobs, or about 14 percent of Yahoo's workforce. The new CEO is under pressure to return the Sunnyvale, Calif., company to growth after a period in which revenue and profit have steadily declined.

"To be very clear, our highest priority is winning in our core business and that will earn us the right to pursue new growth opportunities," Thompson wrote in the memo, which was sent to employees Tuesday and obtained by the San Jose Mercury News.

Under his plan, Thompson said Yahoo will consolidate its consumer products into a single division that will operate Yahoo's popular news sites and home pages, as well as its search and email functions. The division will also have a new "commerce" team responsible for e-commerce and the company's shopping, autos, travel and job listings.

Executives in that division will include Ross Levinsohn, a former Fox Interactive executive who has been running Yahoo's U.S. operations and will now oversee Yahoo's homepages and other media content. Search chief Shashi Seth will oversee search and social-media functions.

The new division, called "Consumer," will also gain product-development staff, including designers and engineers. Meanwhile, the plan eliminates some of what used to be a centralized division responsible for product development. A person familiar with Yahoo's plans said the goal is to make the other divisions more responsive to customers and advertisers by enabling them to develop products quickly.

In his memo, Thompson confirmed that former Yahoo Chief Product Officer Blake Irving is leaving the company, but he said Irving will work with other Yahoo executives to ensure a smooth transition in coming weeks.

Under the new structure, a second division, dubbed "Regions," will be responsible for dealing with advertisers in the major geographic regions of the world. The third division, "Technology," will be responsible for the company's core technology and data centers and also be responsible for using what Thompson described as "Yahoo's vast data stores" to create more personalized content and advertising.

Thompson has said several times since he became CEO in January that he wants to do more with Yahoo's data on web traffic and user interests, although he has not offered details of an exact plan.

The new CEO has been under pressure from critics, including disgruntled investors, some of whom faulted Thompson for announcing layoffs before he outlined his plans for the company. Thompson, however, has told employees that he wanted to hold off on announcing the plans out of respect for the workers who were laid off last week.

Wall Street analysts have said they are eager to hear Thompson discuss his plans for transforming Yahoo when he announces first-quarter earnings next week. "We think such an attempt can't come soon enough," Macquarie Equities analyst Ben Schachter said in a report Tuesday.

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