SUNNYVALE, California: Yahoo chairman Terry Semel is hoping the firm's deal with seven US newspaper groups to share online advertising, content and technology will deflect attention from mutinous rumblings among his lieutenants.

An internal memo written by svp Brad Garlinghouse and leaked at the weekend argued that the company had spread itself too thin across a wide range of online services. It calls for the group to sell its non-core businesses and cut its workforce by up to 20%.

Yahoo's less-than-sparkling financial performance has been causing concern among analysts for some time. A string of profits warnings and technology glitches has seen the dotcom pioneer fall further behind arch-rival Google in the online advertising market [WARC News: 21-Sept-06].

Yahoo's latest collaboration with publishers, including Belo, Hearst and EW Scripps, aims to boost its regional exposure, while the 150-plus titles gain national reach for their local ads and content.

However, the deal is still playing catch-up with Google, which announced two weeks ago a trial of a new system to allow customers to buy advertising space in fifty top US newspapers [WARC News: 07-Nov-06].

The embattled Semel, who has been with Yahoo since 2001, is nevertheless, optimistic that the deal will allow his company to "expand local engagement and subsequently grow local advertising".

Other Yahoo executives say the local and classified ad market is expected to grow to $12.4 billion (€9.6bn; £6.5bn) by 2010, from $3.4bn currently.

Semel remains zip-lipped on the matter of the memo but a company spokesman spins: "The memo itself highlights that we have an open, collaborative culture and a senior management team that is intensely committed to helping Yahoo fulfill its potential as an internet leader."

Data sourced from Financial Times online; additional content by WARC staff