• by Wendy Davis  @wendyndavis, November 20, 2006

In an internal company memo, Yahoo Senior Vice President Brad Garlinghouse called for a complete overhaul of the company, arguing that Yahoo should exit "non core businesses," revamp its management structure and shed as much as 20% of the workforce.

The memo, which has become known as the "peanut-butter manifesto," argues that Yahoo's operations are too unfocused. "I've heard our strategy described as spreading peanut butter across the myriad opportunities that continue to evolve in the online world. The result: a thin layer of investment spread across everything we do and thus we focus on nothing in particular," wrote Garlinghouse in the memo, which was obtained by The Wall Street Journal and posted on its Web site this weekend.

"We need to boldly and definitively declare what we are and what we are not," Garlinghouse wrote. "We need to exit (sell?) non core businesses and eliminate duplicative projects and businesses. The memo was written last month, shortly after an article about problems at the company appeared in The New York Times.

Garlinghouse in his memo also criticized the company for a lack of decisiveness. "Without a clear and focused vision, and without complete clarity of ownership, we lack a macro perspective to guide our decisions and visibility into who should make those decisions," he wrote. The result, he said, is competing initiatives. For example, he said, Yahoo operates two photo services, Flickr and Photos, as well as two music services, Musicmatch and Yahoo Music Engine.

Yahoo sites last month drew 129.6 million U.S. Web users--more than any other company, according to comScore Networks. But, despite its large Web traffic, the company recently faced several high-profile setbacks. Last month, talks to purchase social networking site Facebook reportedly stalled, despite Yahoo's reported offer of $1 billion for the company. Additionally, in September, CEO Terry Semel warned that the company had seen a recent slowing of ad sales in the financial services and automotive sectors. Overall, the company's stock is down more than 30% this year.