Yahoo going on a diet?

The blogosphere is busy with rumors of Yahoo laying off up to 20 percent of its workforce (Techmeme), which numbers about 12,000.

Silicon Alley Insider reported from a source that the potential layoffs are tied in part to Yahoo's stock performance:

The "list" is reportedly the product of a Q4 project in which all group heads were asked to look at redundancies and create their own lists of potential cuts. All the group-level lists have now been turned in to corporate.

The decision to go ahead with lay-off is said to be largely dependent on stock price: Yahoo's stock trading in the low $20s has gotten Jerry's and president Sue Decker's attention. Jerry will feel vulnerable if the stock goes into the teens and will try whatever he can to prop it up. He's not ready to give up the CEO job, sell-out, or shop the company around at this point.

Rafat Ali of PaidContent suggested that a major part of the layoffs would come from European units.

Yahoo has some room to go on a diet but more importantly than just downsizing to improve the bottom line is narrowing the product focus for the company, betting on the services where the company can win. This goes back to the Peanut Butter Manifesto that Brad Garlinghouse, currently senior vice president of Communications & Communications at Yahoo, wrote in November 2006.

In the internal memo, Garlinghouse said that Yahoo needed to focus the vision, restore accountability and sell non-core businesses and cut 15 to 20 percent of its workers:

"We want to do everything and be everything — to everyone. We've known this for years, talk about it incessantly, but do nothing to fundamentally address it. We are scared to be left out. We are reactive instead of charting an unwavering course. We are separated into silos that far too frequently don't talk to each other. And when we do talk, it isn't to collaborate on a clearly focused strategy, but rather to argue and fight about ownership, strategies and tactics. Our inclination and proclivity to repeatedly hire leaders from outside the company results in disparate visions of what winning looks like — rather than a leadership team rallying around a single cohesive strategy."

Jerry Yang has made progress on some of those fronts. During his CES keynote, Yang gave a sneak peek at the next generation user interface and touted Yahoo Go for mobile users. If the rumors are true about layoffs, eight months into his tenure as CEO of the company he co-founded Yang has one of the toughest decisions of his career to make.